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

UK 100 called to open +35pts at 6840, still in an uptrend from yesterday’s lows, but hampered by horizontal resistance at 6870. Bulls need a break above 6870 . Bears require a breach of 6825 for another go at 6775 rising support. Watch levels: Bullish 6870, Bearish 6825

Calls for a positive open come in spite of another volatile mixed session on Wall St, with Dow swinging another 500 points to end the day barely negative. Asian markets, however, found a more bullish bias as trade war concerns faded, helping trade-sensitive stocks advance overnight (dual-listed Miners +1.5% on Australia’s ASX).

Trade war worries have faded on; 1) reports that Huawei’s CFO was bailed pending extradition; 2) President Trump implying potential for her freedom in exchange for a China trade deal, and; 3) China confirming cuts to US auto import tariffs (15% vs 40% prev).

GBP at 21-month lows after reports that PM May will face a internal leadership challenge, though not yet a full Commons no-confidence motion, along with Europe pouring cold water on any suggestions of Brexit concessions on Irish backstop (clarification possible, hard limit a non-starter).

Oil prices are higher after a significant drawdown in API-reported oil inventories (-10.2m vs. -3m est. vs. +5.3m prev.), potential easing in global trade tensions, last week’s OPEC led supply cuts and disruption of crude exports from Libya’s El Sharara oilfield, seized by militants over the weekend.

In corporate news this morning British American Tobacco FY guidance unchanged; de-leveraging on track, committed to 65% div payout; Tobacco Heating/Vapour on track for £900m FY revenues.

Wood Group trading in-line, back to growth, $500m revenue synergies, cost synergy target now over $210m; awarded major EPC pact on US Gulf Coast; 2019 outlook favourable for earnings growth underpinned by more cost synergies, but oil & gas volatility may impact contract awards.

Bloomberg reports a US appeals court ruling Dr Reddy’s will have to wait longer before selling a generic version of Indivior’s Suboxone Film opioid addiction treatment, giving Indivior time to challenge a 20 Nov appeals court decision.

Sainsbury to appeal CMA timetable for the ongoing investigation of its merger with Asda, asking for additional 11 working days over Christmas to respond to CMA requests for information. Ratings agency Fitch revises Just Group outlook to Stable (from Negative); affirms rating ‘A’.

Rolls-Royce trading in-line, expects operating profit and cash flow in upper half of guidance range. Confident in increased 2019 Trent 7000 volumes after 2018 reduction. Expects mid-teens Civil Aerospace FY growth. Defence & ITP Aero in-line, Power Systems strong. Restructuring on-track. Begun to build Brexit inventory; transfering design approval for large aero engines to Germany.

Dixons Carphone H1 like-for-like revenues +2% (Q2 +4%), swings to £440m pre-tax loss (from £54m profit), free cash flow -33%, net debt +33%, £300m profit guidance unchanged, exceptional costs now seen £100m vs £30m, dividend rebased (-35.7%). Extra £200m extra capex over 3 years.

Superdry H1 revenue +3.1% YoY, underlying pre-tax profit -49%, interim dividend unchanged. Sales under pressure from unseasonably warm weather (£11m profit impact in Nov and similar impact expected in Dec). Warns on FY profits, now seen £55-70m.

In focus today will be further discussion about the government’s deferral of a ‘meaningful’ Brexit vote and more speculation about a potential no-confidence vote now the PM has returned from her continental charm offensive to gain assurances on the treaty’s contentious Irish backstop.

Keep an eye on GBP, with any strength likely to hurt UK Index stocks depressing the value of $ dividends and international sales/profits. That said corresponding USD weakness can help commodities. Domestic stocks are also at risk of more political instability and hard Brexit threats.

Macro data of interest today includes US Consumer Inflation (CPI: 1.30pm), with the Core metric forecast a touch stronger in November at 2.2% YoY vs 2.1% in Oct (headline much stronger at 2.5% vs 2.2), ammo for the Fed to hike rates further to keep inflation in check around its 2% target.

EIA Oil inventories (3.30pm) will be looked to for another drawdown to echo last night’s strong API report, helping keep US West Texas Crude oil prices up off their $50/barrel lows. Speakers are limited to the ECB’s Hakkarainen (1:30pm) with welcome remarks at the inaugural meeting of the International Quality Network organised by ECB.

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