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

UK 100 Index called to open -15pts at 7636, but off its overnight lows of 7612. After breaching twin support (5-week rising trend-line/3-week up channel floor and yesterday’s lows), the index is trying to recover ground lost overnight. Bulls could do with a break back above 7655 overnight highs, to get back in that rising channel. Bears require a breach of 7612 overnight lows in order to see further downside. Watch levels: Bullish 7655, Bearish 7610

Calls for a negative open come after downbeat trading on Wall St was echoed in Asia, only the Nasdaq positive basking in the afterglow of Apple’s earnings. General market sentiment is, however, negative after news that President Trump is considering hiking import tariffs on $200bn of Chinese goods from 10% to a more confrontational 25%.

A stronger USD, after a positive economic assessment by the Fed’s and an outlook suggesting more hikes, is not however, enough via GBP weakness, to help the UK 100 overcome trade war concerns. Oil prices are mixed, but both WTI and Brent are off overnight lows. Gold off its lows despite of USD strength, with some fresh safe-haven demand inspired by trade concerns.

Corporate news this morning includes: Barclays H1 pre-tax profit £1.66bn -29% beats consensus, (+20% to £3.7bn excl. £2bn Q1 litigation); cost ratio improves, impairments -46%; CT1 13%; 2.5p div, +25% HoH, +150% YoY; intends to pay 6.5p div for 2018; on track for medium term targets.

Rolls-Royce H1 beats expectations; revenues +14% organic, profits rebound strongly; expects FY underlying profit & cash flow in upper half of guidance. Restructuring progressing well. Ryanair July customers +4% (rolling 12M +7%), load factor unchanged at 97%.

Aviva H1 operating profit +4% excluding disposals, trading in-line with consensus; div +10%. RSA Insurance H1 pre-tax profits +12% YoY, op. profit -15% on poor weather, interim dividend +11%, H2 market conditions comparable to H1, targeting improved profits on better weather.

Merlin Entertainments H1 revenues +4.5% organic (+1.3% after FX); visitors +0.8%, benefited from good weather, op profit -6.5% (-14.3% after FX); div +4.2% ; trading in-line. Inmarsat H1 revenue +4.9% YoY (aviation +38.8%, govt. -2.3%), EBITDA -1.8%, reiterates guidance, but reduces dividend.

ConvaTec H1 revenues +10% YoY, op profits +5%, guidance unchanged. Sage Q3 recurring rev. +6.8% QoQ, confirms FY revenue guidance (+7%) and op. margin (27.5%). CRH completes first phase of buyback (€350m).

In focus today will be the Bank of England’s (BoE) latest “Super Thursday”, with its latest monetary policy decision, the meeting minutes, the Quarterly Inflation Report (12pm) and a press conference with Governor Carney (12.30pm).

Economists expect delivery (finally!) of a much delayed interest rate hike, in spite of Brexit uncertainty, only the second hike in a decade and only the first if you exclude last November’s reversal of July 2016’s emergency Brexit cut. The Quarterly Inflation Report will also be scrutinised for the medium-term price growth outlook.

Markets will also be very interested in the rate decision vote split in the meeting minutes. Consensus is pencilling in an almost unanimous 8-to-1 vote in favour of a hike, with deputy governor Cunliffe (dovish) seen remaining a dissenter. Any additional votes against could signal uncertainty about the state of UK economy (and inflation) putting extra pressure on GBP and interest rate-sensitive UK Index Banks although it may help Housebuilders and Retailers via hopes of cheaper borrowing for longer.

In macroeconomic data, look out for UK Construction PMI (9:30am), expected at its highest since Nov 2017, a potentially positive sign for Housebuilders. Eurozone Producer Prices (10am) are expected to accelerate to 3.5% YoY, their highest pace of growth since April 2017, supportive of the European Central Bank’s desire to tighten policy.

Across the Atlantic, US Factory Orders (3pm) for June are expected stronger, helped by an uptick in aircraft orders, although still slower than the Feb-Mar high.

As the quarterly reporting season passes the mid-point, we have only a few US companies reporting, including chemicals manufacturer Dow DuPont, cereals maker Kellogg and insurer AIG.

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