Markets Overview:

UK 100 called to open +10pts at 7225, extending yesterday’s breakout above 7200 for the first time since month-end. Bulls need a break above overnight highs of 7245. Bears require a breach of 7205 rising support. Watch levels: Bullish 7250, Bearish 7200.

Calls for a positive open derive from gains in Asia fuelled by a Wall St rally. The latter was prompted by comments from Fed Chair Powell being digested as the Fed prepared to cut rates (echoed by vice-Chair Clarida) should the US economy struggle under persistent trade tensions.

However, Powell only said he’d “act as appropriate to sustain expansion”, which is merely a reiteration of current patient policy unless US macro data forces his hand. The comments did, however, serve to vindicate bond market moves which are pricing in one or more cuts  this year to keep the US economy on an even keel. On Monday the Fed’s Bullard said a cut could be warranted.

Oil prices flat Oil while Copper holds its recent gains, helped by USD weakness. The latter is pushing GBP higher, keeping UK Index from overnight highs. Gold still trying higher.

In corporate news this morning:

Aviva says Tom Stoddard to step down as CFO end-June with Jason Windsor, currently CFO of Aviva UK Insurance, becoming interim CFO on 1 July 2019.

Ryanair May traffic +13% YoY, of which Ryanair +8%; Load factor 96%. Rolling 12M traffic +10%.

Non-Standard Finance lets its hostile offer for Provident Financial lapse; Wouldn't have sufficient regulatory capital due to minority interests; expects efforts to have cost it £10-15m.

Biffa FY net revenues +4.4% (+1.5% organic), Underlying EBITDA +0.5%, underlying op profit +0.6%, underlying pre-tax +7.4%; cash flow +7.7%, final dividend +8.1%; Guidance unchanged; Reorganized into two divisions: Collections and Resources-and-Energy.

GB Group FY revenues +19.9%, adj. Op profit +21.7%, pre-tax +10%, dividend +12.8%; International revenues grew from 34% to 45% of total; current trading in line with expectations

AA trading in line with expectations, remains well positioned to deliver Trading EBITDA growth and strong free cash flow generation in FY20 as well as meet med-term growth targets to FY23.

Hurricane Energy says first oil achieved and Lancaster field now on production.

Chemring H1 revenues +5% (+2% ex-FX), underlying EBITDA -6% (-9%); underlying operating profit +4% (flat), underlying pre-tax +19% (+16%); net debt -1%, interim dividend +9%; FY expectations unchanged, significant H2 weighting to revenue, underlying operating profit and cash. Approximately 95% of expected H2 revenue in order book or delivered to date.

Workspace FY net rental income +16%, trading profit after interest  +19%, pre-tax -19%; EPRA NAV/share +4.7% (CBRE property valuation +2.7%); final dividend +20%; Board confident in outlook

Babcock International sees 3-4% earnings growth over 5 years; Sustain margins around 11%; Generate around £1.4B of free cash flow over the next 5 years.

Go-Ahead appoints Elodie Brian CFO on a permanent basis.

Card Factory Q1 total group sales +6.4%, +2.3% like-for-like; Positive start to year. Considering uncertain macro outlook and challenging consumer conditions, and with key trading periods still to come, expects FY like-for-like sales marginally positive, FY profit expectations unchanged.

In focus today:

Eurozone PMI Services (8-9am) is seen ceding ground a little, with its components mixed (Italy back in contraction; France confirming recovery; Germany off highs). The UK PMI Services (9.30am) may be little changed. Remember the UK economy is 70-80% services, so any big deviation versus consensus expectations could move GBP and the UK Index .

Eurozone Retail Sales (10am) are expected to show negative growth in April, with the annual pace of improvement slowing, echoing yesterday’s inflation reads. Watch EUR.

After mixed manufacturing data on Monday, how will US PMI and ISM Services/Non-Manufacturing (2.45/3pm) fare? More declines? Components mixed? Watch USD.

EIA Oil Stocks (3.30pm) could influence oil prices late in the day while the Fed Beige Book (7pm), will offer the central bank’s latest assessment of the US economy as a whole. Watch USD.

Will Fed speakers (Clarida and Bostic; 2.45pm) have anything more to add to what Chair Powell  said yesterday?

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