Markets Overview

UK 100 called to open -20pts at 7185, after breaking below 7200. That said, overnight lows of 7160 have held up. Bulls need a break above 7200 to confirm a bounce and revival of the post Christmas rising channel. Bears require a breach of 7160 to breach said channel floor and extend Friday’s sell-off. Watch levels: Bullish 7200, Bearish 7160

Calls for a negative open come after Friday’s sell-off extended into the new week, Asian markets sharply lower (Japan -3%, worst trading day since Dec, Australia -1%, worst since Jan). This comes after worsening macroeconomic data from the US and Germany, a more dovish Fed, disappointing corporate earnings and worries over global economic slowdown.

A closely-watched indicator of US recession, the difference between 3-month and 10-year US government bond yields, inverted for the first time since 2007-09 financial crisis. Increased demand for longer-term US government debt suggests less confidence in the near-term business outlook.

Demand for safe-haven assets is strong, gold trading above $1315, while Japanese Yen hit 6-week highs against the USD. Other key commodities, including copper and oil, are sliding lower as demand for US debt debt pushing USD higher, making commodities more expensive. In turn, GBP weakness is buoying the UK Index off its low.

In corporate news this morning;

Apax/Warburg Pincus/Canadian Pension consortium makes £3.4bn cash offer for Inmarsat ($7.09 + 12c final dividend). Currently worth £2.6bn or 555p per share; a 9.6% premium to Friday’s close.

Sports Direct confirms it offered to buy Magasin du Nord from Debenhams; offered more than fair value, but received no response or valuation info to suggest offer was too low. Says House of Fraser not a competitor of Debenhams; Had dealings with advisory group, but lack of board engagement.

Pennon FY performance in-line. Doubles provision again Interserve receivables to £16m; still subject to revision. Secured £680m financing this year. South West Water 2020-2025 business plan “fast tracked” by Ofwat. Return on Regulated Equity on-track to outperform (11.8% cumulative rate).

ConvaTec appoints Karim Bitar new CEO (currently CEO of Genus), effective 30 Sept. Chairman Christopher Gent to retire 9 May, with current interim CEO temporarily taking the Chair.

Ratings agency Moody's affirms ITV’s credit rating at Baa3 with a Stable outlook.

AstraZeneca’s Forxiga oral treatment for Type-1 diabetes approved by European Commission. Drug still under review in US and Japan.

Rio Tinto has suspended some Robe Valley iron ore mining and Pilbara rail operations as cyclone hits Australia. This follows last week’s news clearing ships from ports ahead of time. BHP says cyclone impact on iron ore exports will be outlined in Q3 report.

Amigo Holdings won't bid for Provident Financial to scupper hostile takeover by NSF. Also downplays FCA concerns about use of guarantor lending (stable at just under 10% of repayments). Provident Financial response doc to hostile approach from NSF says “not in shareholder interest”.

Marsh & McLennan gets EC clearance to acquire Jardine Lloyd Thompson. UK High court hearing expected 29 March; approval expected 1 April. JD Sports sends formal offer doc for Footasylum.

US fund Asteya Partners, which has a seat on Burger King’s parent company’s board, is building a stake in Domino’s Pizza, according to the Sunday Telegraph.

John Wood Group agreed to sell its non-core conveying & material handling solutions business to South Africa’s Murray & Roberts for $38m, sale expected to close in Q2’19. LondonMetric Properties sold two logistics warehouses in Sheffield and Wakefield for £67m to Exeter Property.

In focus today:

Economic news on Monday is relatively limited in terms of both macro data and speakers, so most of the focus will be on political events in Westminster surrounding Brexit. According to reports in the Sunday broadsheets, PM May fended off an internal Cabinet coup to unseat her and install a temporary caretaker Tory Prime Minister to deliver Brexit, but at the same time was still struggling to muster sufficient support to finally push through her latest Meaningful Vote (MV3).

The Brexit deadline extension given by the EU leaders last week is limited to 12 April and any further prolongation is conditional on the House of Commons swiftly passing MV3. Should the vote never materialise due to procedural gridlock in Parliament or fail to pass yet again due to ERG/DUP/Labour opposition, “no-deal” Brexit remains the automatic default option on 12 April.

The options before MPs this week are thus: (a) a series of indicative votes to find out which option has the most support (e.g. May’s deal, Customs Union, no-deal, no Brexit, 2nd referendum), (b) May’s Meaningful Vote 3 straight away, and (c) no substantive voting and a hard Brexit in mid-April.

In terms of macro data, we’ll see German March IFO Surveys (9am), with the Business Climate expected to hold around 6-month lows, while Expectations recover slightly. In the US, the Chicago Fed National Activity Index (12:30pm) could regain some ground after an unexpected swing into negative territory last month. The Dallas Fed Manufacturing Index (2:30pm) is expected to moderate in March after a strong bounce in the previous month.

Speakers today include ECB’s Lautenschläger (9:30am, hawkish, EU Project Day in German schools) and Cœuré (9:30am, hawkish, “Portugal: reform and growth within the euro area”). Stateside, the Fed’s Harker (10:30am, non-voter, dovish) speaks on economic outlook.

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