Markets Overview

UK 100 called to open -20pts at 7140, still pointing towards the apex of a March narrowing pattern, consolidating 11% gains from Christmas through mid-Feb. Bulls need a break above 7183 overnight highs to post-Christmas rising channel uptrend. Bears require a breach of yesterday’s 7125 lows to test rising support at 7100 and 7075. Watch levels: Bullish 7185, Bearish 7120

Calls for a lower open come after downbeat sentiment in Asia in the wake of mixed China macro data. Jan/Feb China Industrial Production missed expectations (+5.3% YoY vs +5.5% est./+5.7% prev.), though Investment and Retail Sales were broadly in-line. Trump’s suggestion about postponing a trade summit with Chinese counterpart Xi added to the risk-off mood.

GBP has pulled back from overnight 9-month highs, interrupting a 3%/3-day rally, following yesterday’s narrow vote in UK Parliament against a No Deal Brexit. Also pressuring the Pound and UK Index Housebuilders was disappointing Feb RICS House Price data, which hit its lowest level since May 2011 (-28 vs. -24 est./-22 prev.).

Oil prices are higher, Brent Crude trading 4-week highs, after DOE Crude Oil Inventories fell more than anticipated last week (-3.8m vs. +2.8m est./+7m prev.).

In corporate news this morning;

Watch UK Index Miners after disappointing China macro data and UK Index Housebuilders after poor RICS house price data.

Sports Direct offers Debenhams 12-month 0% unsecured £150m funding (£40m to repay bridge loan, £110m for working capital), in return for Mike Ashley becoming CEO and 5% new shares, raising his stake to 35%. Also increased stake in Game Digital to 28.43% (from 25.75%).

John Wood wins contract for new Siemens HL-class gas turbines at power station in North Carolina. Balfour Beatty selected as preferred bidder for Network Rail’s £1.5 billion Central Track Alliance contract. Gets 80% of contract (Atkins: 10%, TSO: 10%).

OneSavings Bank and Charter Court Financial Services agree all-share merger; CCFS shareholders to get 0.8253 new OSB shares; 45% stake in new group. One Savings Bank 2018 pre-tax profit +15%, loan book +23%, cost-to-income +100bp,NIM -12bp, impairments +3bp, ROE -200bp, final div +10%. CCFS 2018 pre-tax profit +41.6%, NIM -11bp, loan book +24%, retail deposits +15.9%; cost-to-income -540bp, ROE +220bp; 9.9p inaugural final div.

Capita 2018 adj. revenue -5%, adj. pre-tax profit -26%, free cash flow -209%, order book -13.4% after loss of Prudential and local govt business. Sees FY’19 pre-tax profit from -6% to +4.5% and net debt/EBITDA ratio in top half of 1.0-2.0 range. Reiterates 2020 cost savings, cash flow and margin targets. Will consider dividend payments when generating sustainable cash flow.

Just Group announced 9.99% rights issue and sale of £300m+ debt. FY gross written premiums +14.9%, total revenue -3.6%, adj. op. pre-tax profit -5% (new business +44%, in-force +1%). Solvency ratio -30bps to 136%. Expects to reinstate rebased dividend later this year.

Cineworld 2018 pro-forma admissions +2.6% (adj. for Regal acquisition), revenue +7.2%, adj. EBITDA +9.4%. Final div $0.10. Regal integration benefits better than expected, to deliver $150m FY’19 synergies. Gem Diamonds sells pink 13.33 carat diamond for $8.75m.

Savills 2018 revenues +10%, underlying profit +2% (statutory -3%), final div +3.3%; solid start to 2019 but year ahead overshadowed by macro/political uncertainties; difficult to predict; see transaction declines in a number of markets; reiterates guidance.

DFS first-half revenues +9.9% (29.1% incl. Sofology acquisition), underlying pro-forma EBITDA pre-tax profit +23.8%, leverage -0.2x, interim div unchanged; all four brands achieved like-for-like revenue growth; H2 order intake lower than H1 but guidance unchanged.

In focus today:

After twice voting to take No Deal off the Brexit table, UK MPs vote again tonight, this time on extending Article 50. Extension still requires unanimous EU27 approval, surely necessitating justification for what the PM hopes to achieve (Meaningful Vote 3.0? 2nd referendum? General election? Revoke article 50?), and how long she needs. Consensus is divided, on both sides of the house, and either side of the channel, whether it should be requested or indeed granted.

In macro data, US Export/Import Prices (12:30pm) are expected to rebound from 3 months of contraction. US Jan New Home Sales (2pm), meanwhile, are forecast broadly unchanged. Oil traders will pay close attention to the OPEC Monthly Report for important commentary on the global outlook for energy supply & demand.

In terms of speakers, the ECB’s Nowotny (8am) speaks in the Austrian parliament. Irish Central Bank Governor/incoming ECB Chief Economist Lane (4pm) addresses students in Dublin.

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