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

UK 100 called to open +75ps at 6885, maintaining a weeklong rising channel from 2018 lows and retracing close to a half of December losses. Bulls need a break above 6902 to break through intersecting support-turned-resistance from November. Bears require a breach of 6841 overnight lows. Watch levels: Bullish 6920, Bearish 6835

Calls for a positive open come after strong trading on Wall St and in Asia after investors digested positive updates on US-China trade talks. Positivity stems mainly from the WSJ report that China is planning to tweak its Made in China 2025 industrial policy and give more market access to foreign companies, as well as purchase more US soybeans to narrow the trade deficit. China-sensitive stocks (HSBC, StanChart, Miners) are all rallying in overnight trading in Asia.

The Pound is rebounding from 20-month lows after PM May survived the leadership battle, bruised, but still fighting. That said, the bounce is capped by investor worries over the dim prospects of Brexit deal re-negotiation.

In corporate news this morning, Bunzl Q4 performance in-line and notes FY like-for-like revenue target of 8-9% (4% organic). FX headwinds of 3-4% expected. Announced acquisition of CM Supply, a Danish foodservice distributor, and said earlier takeover of Volk do Brasil has been approved by regulators (to be completed in Jan 2019).

Ocado Q4 revenue +12% YoY (in-line with target), avg. orders per week +13.1%, avg. order size -1%. New automated warehouses in Andover and Erith performing in-line with expectations.

TUI FY underlying like-for-like sales +10.9% YoY, EBITA +10.5%, pre-tax profit -3.7%, dividend +10.9%. €40m non-cash impact of weak Turkish lira. Holiday Experiences growing, but Markets & Airlines weaker after warm weather/airline disruptions. Reiterated 10%+ annual profit growth target.

Sports Direct H1 revenue +4.5%, underlying EBITDA -4.7% (+15.5% excl. House of Fraser), underlying pre-tax profit -26.8%. Notes challenges in turning House of Fraser around. Reiterates 5-15% FY EBITDA target range (excl. M&A), but incl. House of Fraser profits to be behind last year.

Serco expects FY underlying trading profit to grow 30-40% (£90-95m) and in-line with expectations in 2019 (£95-100m). Expects underlying 2018-2019 EPS 5-10% better than current consensus after lower tax rate. Big Yellow acquired the Wyvern Industrial Estate in New Malden for £28m.

Ultra Electronics FY trading in-line and notes strong order inflow. Working capital requirements growing due to higher order book, underlying revenue growth and a constrained supply chain, leading to expected 65-75% 2018 cash conversion.

PZ Cussons Q2 trading in EU/Asia strong, but Africa remains challenging due to economic situation in Nigeria. Expects consumers to remain under pressure in all markets, with FY performance dependent on H2 trading in Nigeria.

In focus today will be the fallout from last night’s Conservative Party confidence vote in UK PM Theresa May’s leadership. The PM may have won support of her peers, but her majority (200-117) was far from “strong and stable”. She now re-enters the difficult battle to pass her Brexit deal through Commons in a weakened state. A battle has been won, but what of the war? Watch GBP and UK Index .

At the ECB’s Monetary Policy decision (12:45pm; Draghi’s press conference 1:30pm) economists expect all 3 key interest rates unchanged and confirmation of the ECB’s QE bond-buying stimulus programme ending in December. Note ratings agency Fitch yesterday saying that weak growth and inflation may not be enough to alter this timetable, but the first interest rate hike may not come until 2020 rather than before end-2019.

Otherwise it’s a quiet day for macro data, with the exception of US Import and Export Prices (1:30pm), the former expected negative in Nov vs Oct having been inflated by rising oil prices, while Export prices fall back to just shy of flat.

Outside of Draghi’s press conference, speakers are limited to ECB’s Lautenschläger (9:30pm), giving remarks at the Financial Market Policy conference in Frankfurt and colleague Angeloni (1:30pm) making a speech at the “Fixing the European Dream: Economic and Monetary Union, Banking Union, Capital Markets Union, and What Else?” plenary session in Rome.

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