Markets Overview

UK 100 called to open -10pts at 7290, but only marginally lower than yesterday’s 7305 breakout highs, likely taking a breather. The post-Christmas rising channel remains intact, allowing Bulls to look as far north as last September’s 7550 highs. Bulls need a break above 7305 to build on the breakout and extend this latest leg higher. Bears require a break below 7280 for another test of the 7262 breakout. Watch levels: Bullish 7310, Bearish 7275

Calls for a negative open come after mixed trading on global markets, Wall St outperforming thanks to Tech strength, while Asia was more downbeat, pulling back after a robust Monday rally.

The trade war story is adding to negative sentiment after China’s Foreign Ministry confirmed President Xi not visiting the US in March for an eagerly awaited summit with US counterpart Trump.

UK PM May will reportedly request a sizable 9-12 month Brexit delay from fellow leaders at this week’s EU Summit in Brussels on Thursday. That said, she has little to bargain with in terms of justifying such a delay after Speaker Bercow put a spanner in the works (see below).

USD is extending last week’s losses against major peers (-1.3% from March highs), with corresponding GBP strength hurting the UK Index ’s sizable international contingent. Traders await the outcome of the Fed’s latest monetary policy gathering for FX direction.

In corporate news this morning;

Antofagasta FY group revenue -0.3% (in-line with est.) after average copper price -6.3% offset by higher copper production , EBITDA -13.9%, op. cash flow -24.8%, net debt +30.7%. Cuts final div. -8.8% (FY: -13.9%). FY’19 production, cash costs (-1%) and capex (+37%)  targets unchanged. Sees $100m in FY’19 cost savings (-45% from 2018).

Ocado Q1 retail revenue +11.2% YoY, avg. orders +11.3%, order size -0.2%, cash -8% QoQ. Fire at Andover hit revenues by 1.2%, company still assessing impact on FY guidance. Growing Erith capacity faster to make up for Andover shortfall.

Wood Group Chairman resigns (exceeded term limit). FY revenues +11.7%, adj. EBITDA +5.4% (both pro-forma); op. profit +68%, back to pre-tax profit; net debt -5.9%, final div +2%; £10bn order book; trading in-line; sees 2019 revenues +5%, deleveraging to be more gradual.

ASOS Q2 retail sales at +13% (+11% at constant FX), missing +15% estimate. UK +14%, EU +12%, US +4%, RoW +20%. Active customers +16%, but average selling price & basket size -1%. FY sales, margin and capex targets unchanged. Sees FY net debt c. £50m.

The FT reports Sainsbury’s planning a public commitment to cut prices for “everyday items” by at least 10% after its proposed merger with ASDA, in its latest appeal to UK regulator the CMA.

Evraz announces sale of 1.8% of shares at 595p (5.5% discount to yesterday’s close) by owner Abramovich, non-exec Chairman Abramov, CEO Frolov and a non-exec Director.

Standard Life Aberdeen reports successful outcome to Lloyds arbitration; Lloyds not entitled to end agreement; SLA to continue managing £100bn assets in meantime. SLA considering next steps.

Ofgem approves SSE’s £790m 600MW subsea Shetland-Mainland link (wind); Western Isles link proposal needs to offer better consumer value for money. Ofgem decision due mid-2019.

Kier Group names Andrew Davies as new CEO; previously CEO at Wates group (2014-18), had been lined up to lead Carillion before it collapsed and was at BAE Systems for 28 years prior.

TP ICAP FY underlying revenues flat (in-line), pre-tax profit +5.1% (top of range). Final div flat. Notes political and economic uncertainties. Confirms Richard Berliand as Chairman.

Ferrexpo delays FY results after independent review on charitable donations finds more discrepancies suggesting funds may not have been used for stated purpose.

Polypipe 2018 revenues +5.2%, operating profit +5.3% (underlying +1.9%), pre-tax profit +4.7% (underlying +2.1%), cash generation +11.9%, dividend +4.5%; fundamentals robust, structural housing shortage, help to buy extended, low rates; uncertainty in markets, but expects growth.

Softcat H1 revenues +21.1%, gross invoiced income +28.5%, gross profit +26.5%, operating profit +40.4%, interim div. +36.4%; Expects full year outcome marginally ahead of previous expectations.

Mulberry CFO resigns after 3 years. Bonmarche issues another profits warning. Bloomsbury Publishing expects FY 2019 results in line with views.

In focus today:

All eyes on Westminster after yesterday’s critical decision by Commons Speaker Bercow to refuse the PM permission to hold Brexit Meaningful Vote 3.0 without sufficient changes. Such changes appear unlikely given the EU’s firm refusal to continue further negotiations, meaning they will have to come from the UK side to avoid a constitutional crisis less than 2 weeks before the Article 50 Brexit deadline. Watch GBP (and its knock-on for the UK Index ) as political wrangling continues.

In the US, the Federal Reserve begins its 2-day monetary policy meeting, with the statement and Wednesday’s press conference (6:00pm) being key. The Dollar Index is testing March lows ahead of the decision, suggesting expectations of further dovish rhetoric, helping USD-sensitive UK Index Miners/Energy. Will this trend continue?

In terms of macro data, attention will be on UK Jobs and Wages (9:30am). The unemployment rate was likely flat at 4%, while Average Earnings growth is expected to slow to 3.2% (from 3.4% in Dec). That said, excl. Bonuses, Earnings are projected unchanged at 3.4% YoY.

Across the channel, ZEW Surveys (10am) may show German Economic Sentiment recovering slightly, albeit still negative, continuing a 6-month run of improvements. In the Eurozone as a whole, however, Sentiment is expected to worsen, while Q4 Labour Costs accelerate to 2.7% YoY (from 2.5% = inflationary for the ECB). In the US, Factory Orders (2pm) likely grew by 0.3% MoM in Jan.

In terms of speakers, we have the ECB’s Chief Economist Praet (9:35am, “Twenty Years of the Euro: Challenges and Opportunities Ahead”) at a panel discussion at an HSBC conference. In the UK, Bank of England Financial Policy Committee member Sharp (6:30pm) gives a speech at the Cass Business School.

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