Markets Overview

UK 100 called to open -45pts at 7150 (ex-div -18pts), back at the floor of a 1-week rising channel. This remains  within, albeit towards the lower end, of a post-Christmas uptrend (7000-7400 rising channel). Bulls require meaningful break above 7200, if not yesterday’s 7210 highs. Bears require a breach of 7140 overnight lows. Watch levels: Bullish 7200, Bearish 7140

Calls for an negative open come following a weak lead from Wall St and mixed trading in Asia (only the Australia’s ASX was positive) after the US trade deficit jumped to new 10-year high and the markets await the results of US-China trade talks. Worries over US economic growth were emphasized by the Fed’s influential Beige Book, which pointed to a cooling US economy.

In corporate news this morning NMC Health FY revenues +28.3% (+15.4% organic, guidance beat), EBITDA +37.9%, adj. profit +19.9%. Final dividend +39.2%. Record rev. and profit and notes a strong 2019 start after strong economic growth in core region. FY’19 guidance (rev. +22-24%, EBITDA +18-20%) unchanged.

Admiral 2018 pre-tax profit +18% beats est (+2% using assuming old discount rate); 66p final div +13.8% (49.1p ord, 16.9p special o/w 11p from Ogden discount change benefit). Return on equity +100bp; Combined ratio +150bp; Net Revs +12%; Clients +14%; Solvency 194% vs 205% prev.

Aviva 2018 op profit +2%; final div +9.2%; solvency II capital surplus -1.6%; solvency II cover ratio +600bp; op capital generation +23%; Net written prems, Combined ratio, and reserve release all flat; new business +2% (excl. divestments); less appetite for bolt-on acquisition; outlook more muted.

Informa FY revenue +34.9% (£2.37bn beating £2.33bn est.), underlying rev. +3.7% (slower than +3.9% in first 10 months), adj. pre-tax profit +33.7% (in-line), free cash flow +25.5%, total dividend +7.1%, net debt +95.3%. Sees 2019 underlying rev. growth, improved margins and strong cash flow.

Greggs FY total sales +7.2% (in-line), like-for-like own shop sales +2.9%, pre-tax profit (pre-exceptional) +9.7% (beats consensus). Final dividend +13.6% (FY: +10.5%) and expecting to declare special dividend with H1 results. Sees a £4.2m hit to FY’19 pre-tax profit from IFRS 16 shift.

Schroders FY net income +2.6%, pre-tax profit -14.5% (-4.8% pre-exceptional, in-line with est.), AUM -6% to £421.4bn (beats £419bn est.). Flat final div better than est. Net outflows £9.5bn reverses from £9.6bn net inflows on redemptions from lower margin business. Notes industry headwinds, but confident in future growth.

 Melrose pre-tax loss widens after GKN acquisition costs (adjusted = £700m profit); results ahead of management expectations; final div +9%; net-debt to EBITDA ratio improves to 2.3x (from 2.5x).

Spirax Sarco FY revs +15% (+7% organic); operating profit +12%; cash conversion improves by 500bp; final dividend +15%; higher degree of uncertainty about industrial production growth in 2019; organic growth to moderate; margins similar; No material impact if current FX rates prevail.

Ratings agency Fitch revises SSE outlook to Negative; affirms long term debt rating at 'BBB+'. The Fed has said most Banks will now be exempt from the 'qualitative' part of its stress tests although the US divisions of Barclays, Credit Suisse, Deutsche Bank and UBS will still face the test in the next exercise.

In focus today will be the European Central Bank’s (ECB) latest Monetary policy update (12.45pm) and Press Conference (1.30pm) with President Mario Draghi. How dovish will the bank be? Will Inflation and growth estimates be cut further?

With Quantitative Easing (QE) bond-buying now over, will more stimulus be forthcoming via another round of TLTRO (Targeted Long-Term Refinancing Operations)? This tool encourages banks to lend to by allowing them to borrow very cheaply, aiming to maintain credit flow and foster growth.

Ahead of that, and rather presciently, the third estimate for Eurozone GDP (10am) is expected to confirm slower growth (1.2% vs 1.6% in Q2). Could a surprise here alter expectations about ECB projections this afternoon?

Before all that, UK Halifax House Prices (8.30am) could move UK Index housebuilders with growth forecast rebounding in Feb (+0.1% vs -2.9% in Jan), improving annual gains (1% vs 0.8% in Jan).

This afternoon’s US Unit Labour Costs (1.30pm) are expected stronger in Q4 (1.6% QoQ vs 0.9% in Q3), with a potential inflationary read-across. That said, Non-farm productivity (ahead of tomorrow’s Non-Farm Payrolls jobs report) may have cooled (1.6% QoQ vs 2.3% in Q3).

Speakers today, aside Draghi’s ECB press conference (1.30pm), will be ECB council member and European Banking Authority head Enria (8:20am) at the 4th SSM & EBF Boardroom dialogue and Chief Economist Praet (5:30pm, “L’impact économique des inégalités femmes-homes”).

Elsewhere, we get the Bank of England MPC member Tenreyro (9am, centrist) in Glasgow and Fed’s Brainard (5:15pm, centrist, voter, “economic outlook and monetary policy”) at Princeton.

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