Markets Overview

UK 100 called to open -20pts at 7130, pointing towards the apex of a March narrowing pattern, continuing to consolidate gains of 11% from Christmas lows to mid-Feb highs. Bulls need a break above 7150 to test the 7190 ceiling of a 1-month consolidation channel. Bears require a breach of 7100 to test 3-month long-term rising support at 7055. Watch levels: Bullish 7150, Bearish 7100.

Calls for a negative open come after a mixed lead from Wall St and Asian markets, with the Dow Jones still weighed down by Boeing’s troubles (-6%) as more airlines and authorities suspend 737 Max 8 flights. That said, the wider S&P was boosted by healthcare and utility names in a bout of defensive interest.

GBP is holding steady following PM May’s widely expected overnight Brexit defeat in Parliament, with markets now eyeing votes on 1) ruling out a No-Deal scenario and 2) extending Article 50. However, neither guarantees any Brexit breakthrough. As it stands, a hard Brexit remains the default.

In corporate news this morning;

Morrisons 2018 like-for-like sales ex-fuel/VAT +4.8% (Retail +1.5%, W’sale +3.3%); Q4/H2 slowed vs Q3/H1 (transactions -1%); adj. pre-tax profit +8.6% (statutory -15.8%), adj. free-cash flow +17.5% (statutory -24%); net pension surplus +15.8%; final div +7.2%, repeats 4p special; £700m wholesale target hit early. On-track for incremental profit target from wholesale/services/interest/online; net debt to stay low.

Hikma Pharma 2018 revenues +7%, core EBITDA +17%, core operating profit +19%, net debt -33.8%. Final div +13% (FY: +11.7%). Sees FY’19 Injectables revenues +2-8%, FX Branded constant growth mid-single digits, Generics +1% to -6% after price erosion.

Standard Life Aberdeen 2018 adj. pre-tax profit for continuing operations -1.5%; but gross inflows +3.9%, but net outflows +24.3% with Assets Under Mgt -9.3%. Final div unchanged. Ahead on cost efficiencies. Challenging market conditions

Dixons Carphone fined £29.1m by FCA over 2008-2015 Geek Squad mobile phone insurance selling. Accepts the short-falls, received discount for early settlement. FY guidance unchanged.

Provident Financial FY rev. flat, books £241.6m impairment for IFRS9 accounting. Adj. pre-tax profit +82.3%, reinstates div (10p/share). Trading in-line. Vanquis refund programme 99% complete and Moneybarn made progress with FCA to address issues. New Vanquis MD to join in April.

Balfour Beatty FY underlying revenue -5%, pre-tax profit +9.7%, order book +10.5%, dividend +33%. FY’19 in-line with expectations and trading environment favourable.

British American Tobacco subsidiary Imperial Tobacco Canada obtains creditor protection against all Canadian litigation (Quebec says liable for C$9.2bn). Protection offers opportunity to settle.

BAE Systems may react to a US Army 2020 budget plan to eliminate/scale back some well-known legacy equipment programs (incl. the Bradley fighting vehicle) to fund future weapons/hardware.

Capita confirms media speculation about unsolicited offer for travel business from Corporate Travel Management. Talks ongoing; no certainty of a deal.

Smith & Nephew acquires Brainlab’s orthopaedic joint reconstruction business which provides surgeons with digital workflow tools. Deal includes Brainlab’s orthopaedic salesforce.

Stobart FY trading in-line, Southend passengers +33%. To move to twice-yearly 3p/share dividend from quarterly pay-outs previously. HSBC issues 9yr $1bn in 3% resettable senior unsecured notes.

In focus today:

Another Brexit vote, this time on a no-deal Brexit, after the PM saw her deal voted down again last night. If a no-deal vote passes, we could be on for a hard Brexit. If it fails, Thursday will see another vote on extending Article 50. If this fails, we could still be on for a hard Brexit. If it passes, however, with EU approval we could delay Brexit and keep negotiating.

UK Chancellor Hammond may find his UK Spring Budget rather overshadowed even if he can boast improved public finances and a consultation on infrastructure funding to replace the axed Private Finance Initiative (PFI), abolished for not delivering value.

Macro data of interest: Eurozone Industrial Production (10am), forecast to rebound in Jan (1% MoM vs -0.9% in Dec), but still week annually (-2.1% YoY vs -4.2%). US Durable Goods Orders (12.30pm) are seen stable Ex-transport, much like Producer Price Inflation, while Construction spending (2pm) bounces ahead of EIA Oil stocks (2.30pm).

Speakers include the ECB’s Mersch (8.30am; “Panel: A cross-sectoral reflection on the past, and looking ahead to the future”) and Angeloni (8.45am; “The new economic scenarios for investors: markets, ECB & EU”), Coeure (5pm; Speech and student Q&A at Bocconi University, Milan).

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