Markets Overview: (Source: Bloomberg, FT, Reuters, DJ Newswires)

UK 100 Index called to open +30pts at 7765, again testing the ceiling of a 3-week sideways channel, with potential for a breakout to allow another rally back towards the 7903 record highs posted late May. Bulls need a break above Monday’s 7774 highs. Bears require a breach of 7735 rising support. Watch levels: Bullish 7775, Bearish 7735.

Calls for a positive start are supported by gains in Asia thanks to a positive Singapore summit where US President Donald Trump and North Korean leader Kim Jong Un allegedly pledged (we await confirmation with press conference imminent) to keep up momentum on diplomatic talks and work towards a ground-breaking comprehensive de-nuclearisation on the Korean peninsula.

The initial summit outcome looked promising, both leaders sounding cordial notes during the press conference and signing a bilateral agreement that appears to have North Korea pledging comprehensive de-nuclearisation as a step towards lifting NK sanctions and a formal end to the Korean War.

The UK Index also benefits from a weaker GBP, pushed lower by a combination of USD strength as the safehaven Yen weakened. While a weaker GBP may help Miners, the stronger USD may hurt metals. The GBP could also be a Brexit punchbag ahead of a potential 48 hours of debate and voting on the Brexit Withdrawal Bill.

Oil prices are higher having stabilised from Monday lows to the benefit of UK Index Energy names despite a stronger USD, as supply uncertainty swirled around crude (OPEC/Russia reversing cut, Iran/Venezuela supply concerns). Gold prices fell to $1296 as investors lifted their risk appetite and demand for safe-haven assets waned.

In corporate news this morning Rio Tinto appoints Jakob Stausholm as new CFO (previously CFO of shipping giant AP Moller-Maersk) to succeed Chris Lynch from 3 Sept. British American Tobacco continues to perform well, trading in line with expectations; Adjusted revenue and profit growth to be H2 weighted, Expects FX headwind of 9% for H1 and 6% for FY.

Randgold Resources says feasibility study on Massawa gold project (Senegal) nearing finalisation and development decision scheduled for end of this year.  AstraZeneca and Eli Lilly says PIII lanabecestat trial for Alzheimer’s unlikely to meet primary endpoints

Halma FY revenues +12% and adj. pre-tax profits +10% (organic +10% & +9%, respectively), dividend +7%; Trading positive, order intake ahead of order intake last year and revenue this year. Domino's Pizza CFO resigns; FY guidance reiterated. Workspace gets planning permission for refurbishment in Farringdon and additional space in Bermondsey.

Bellway reiterates FY guidance of volume growth +600, 10K homes, average selling price >280K, flat 22% operating margin; reservations +5.4%, forward sales +7.8%. Crest Nicholson revenues +13% (units +18%, avg sale price +5%), operating profit +1%, pre-tax profits -2%, dividend unchanged; The business is taking actions to address its cost base and the overall efficiency.

Ted Baker revenues +4.2%, gross margins in-line, despite challenging market. Boohoo Q1 group revenues +53%, growth in all markets, gross margin 55.2% +1pt, net cash doubled; reiterates FY guidance for revenues +35-40%.

In focus today will be UK labour market data (9.30am), via the latest Unemployment rate and Average Earnings growth. Headline unemployment is expected unchanged at 4.2% in April, albeit with a slower rate of 3M change (+110K jobs vs +197K prev). Average Earnings growth is also expected to remain well above 2%, potentially contributing to a rebuilding inflationary pressures that will force the Bank of England to hike rates, to the benefit of GBP, but detriment of the UK Index .

This afternoon, US Consumer Price Inflation (1:30pm) in May is expected to show an acceleration for the Headline metric to 2.8% YoY (from 2.5%), its fastest since late 2011-early 2012. The more important core measure, however, which strips out volatile components such as food and energy, is expected to have risen to 2.2% after a 2-month pause, to its quickest pace since February 2017, and vindicating another a Fed rate hike on Wednesday.

Speakers take a back seat to the US-NK summit in Singapore which saw Kim Jong Un (eager to bring North Korea in from the cold) talk with US President Donald Trump (looking for a geopolitical “win” after leaving the G7 in tatters ) signed a pledge for a comprehensive de-nuclearisation of North Korea.

Closer to home, the UK House of Commons will debate and vote on the EU Withdrawal Bill, including 15 amendments send down from the House of Lords. With most of the amendments seeking to “soften” the Brexit process (and thus unpalatable to Tory Brexit hardliners), voting is expected to take up two whole days.

Away from geopolitics we have the OPEC Monthly Report (12:20pm) ahead of the US API inventories report tonight (9.30pm) With uncertainty swirling about plans for OPEC/Russia to roll back some of its coordinated production cuts, rifts are emerging within OPEC itself; Iraq, Iran and Venezuela resisting calls to return to the status quo ante. Traders will be looking to see if the report recognises any of these differences, or if Saudi Arabia and Gulf allies are determined to resume full-scale crude exports to make the most of the now higher oil price.

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