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

UK 100 Index called to open +20pts at 7630, continuing this week’s sideways movement in a narrow 7620-7670 channel. Bulls need a break above 7648 overnight highs to attempt another test of channel’s ceiling. Bears require a breach 7615 2-week rising support. Watch levels: Bullish 7660, Bearish 7612

Calls for a positive open are supported by gains on Wall St where S&P 500 and Dow recovered after multiple days of losses, as the Turkish lira rebounded from recent lows. Tech and Financial sectors led the advance on Wall St, with major bank stocks closing more than 1% higher. Adding to UK Index ’s upward direction today is the USD pushing 14-month highs, with the corresponding GBP weakness a boon for London’s globally-exposed shares.

Some geopolitical worries continue to drag on the markets as Turkey announced that it will be issuing retaliatory tariffs on some US products (rice, alcohol, vehicles, etc), escalating the standoff between two erstwhile NATO allies.

Oil prices are rebounding from overnight losses after private API Oil Inventories posted an unexpected 3.66m barrel build (markets expected a 2.5m draw). Gold prices are plumbing new lows dating back to January 2017 on the back of persistent Dollar strength. Some European markets, most notably Italy’s UK Index MIB, are closed today for the Assumption Day religious holiday.

In corporate news this morning, Royal Bank of Scotland announced it reached final settlement with the US Department of Justice and declares a 2p interim dividend to be paid on 12 October (ex-div 23 August).

Admiral Group H1 revenue +14% YoY, pre-tax profit +9%, UK customers +17%, intl. customers +17%, interim div. +7%. (40.8p normal, 19.2p special). Noted slightly higher overall frequency of claims and elevated inflation in property damage claims costs in H1.

GlaxoSmithKline announces positive headline results for its phase III HIV treatment study, with full results to be announced in an upcoming scientific meeting. AstraZeneca priced a $3bn four-tranche bond issue for general corporate purposes.

Hikma Pharmaceuticals H1 revenue +11%, pre-tax profit +41%, interim div. +9%, raises FY outlook for  generics business to $600-650m range (from $550-600m range), while core op. margin is expected in mid-to-high single digits (from low-single digits), branded business outlook unchanged. Does not expect the same demand for some of its injectable products to continue into 2019. 

Hochschild Mining H1 revenue +9% YoY, adj. EBITDA +19%, silver prod. +8%, gold +14%, op. profit (post-exceptional) -61% on exploration investment and FX headwinds. On track to deliver FY silver production target of 38m ounces. Balfour Beatty H1 underlying revenue -8.5% YoY, op. profit +69%, pre-tax profit +154%, dividend +33%, order book +10.5%, FY earnings outlook on target.

CLS Holdings H1 net rental income +8.7% YoY, pre-tax profit -45%, ERPA net asset value +3%, interim dividend +7.3%, performance in the UK market until Spring 2019 expected to be subdued due to Brexit uncertainty.

In focus today will be the UK’s Consumer Price Inflation (9:30am). Headline July inflation is expected to rise 2.5% YoY (above June’s 2.4% growth), but the more closely watched core inflation that strips out volatile goods such as booze, smokes and petrol looks set to remain unchanged at 1.9% YoY.

This is significant because the Bank of England uses core inflation as one of the key factors in determining its interest rates. If inflation remains under the BoE’s 2% target, it weakens the case for the Bank’s future interest rate hikes. Thus, higher than expected core price growth could be good for UK Index Banks, but negative for Housebuilders.

Those investors who follow UK Index Housebuilders should also watch the House Price Index (9:30am) which is projected to show slower 2.6% YoY growth in June.

In the afternoon, attention turns to the US, where Retail Sales (1:30pm) are forecast to grow 0.3% MoM in July, down from June’s 0.5% rise. Industrial Production (2:15pm) is likewise expected slower at 0.3% MoM (from 0.6% in June).

Projections for DOE Oil Inventories (3:30pm) are looking for another 2.6m barrel crude draw this week for crude. Last night’s API report showed an unexpected 3.66M build which saw oil prices fall overnight. Watch oil & energy stocks, as well as airlines, for potential reaction.

In speakers today, German Bundesbank’s executive board member Beermann (5pm) will be making a speech on German gold reserves.

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