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

UK 100 Index called to open -25pts at 7715, testing intersecting support after 2-day falling highs caused yesterday’s bounce to reverse overnight. Bulls need a break above 7750 overnight highs for another challenge on Aug highs. Bears require a breach of this Wednesday’s 7707 lows. Watch levels: Bullish 7750, Bearish 7707

Calls for a negative open come after a flat to lower close on Wall St which Asia is dovetailing for negative end-of-week sentiment, as international trade tensions continue to take their toll, even after surprisingly good Japanese GDP data. GBP weakness is, however, proving insufficient to support the UK Index , with opposing USD strength hurting the key commodity space (oil, metals lower).

Why’s the USD strong? A combination of GBP weakness (Brexit concerns) but also EUR weakness derived from European Central Bank (ECB) concerns about continental bank exposure (via equity stakes) to Turkish counterparts as the Turkish Lira (TRY) continues to plunge due to biting US-led sanctions and growing economic concerns.

In corporate news this morning UK Index Banks may be sensitive to an FT report about the ECB being concerned about continental bank exposure (BNP Paribas, UniCredit, BBVA) to Turkish borrowers unhedged for the Lira’s (TRY) current extreme weakness.

Santander UK says competitive and uncertain operating environment resulted in H1 pre-tax profits -15% YoY although Q2 improved 18% vs. Q1; Core Tier 1 capital +50bp in H1 to 12.7%, ahead of FY target, non-performing loans fall, but costs (vs income ratio) rise to above FY target. Diageo starts £2bn buyback with a £1.4bn first tranche running today through end-Jan.

Ryanair cancels hundreds of flights due to strike action in Europe, while a Dutch court has halted the company’s attempt to block Dutch pilots joining the strikes. SSP diversifies debt sourcing with $175m US private placement (7, 10, 12yr maturities; 2.85-4.6% coupons); proceeds for reducing net debt  (£290m at H1) and general corporate usage.

IP Group announced completion of £65m financing arrangement for its cancer-treatment subsidiary. Advanced Medical Solutions gets US FDA approval for two wound-dressing products, which it expects to launch in US in Q4.

In focus today will be UK Q2 GDP (9.30am), forecast to improve from 2018 lows after extreme weather hampered Q1 to extend the trend os slowing growth from mid-2017 as Brexit uncertainty grows. Watch GBP, the UK Index and Banks.

UK Industrial Production probably rebounded in June although Construction may post flat growth, normalising, after a very strong May rebound on the back of a very weak April.

This afternoon, US Consumer Price Inflation (1:30pm) may even improve to 3% YoY from 2.9%, and core hold firm at 2.3%, still well above the Fed’s 2% target and thus vindicating further interest rate hikes this year that could keep pushing the USD higher.

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