Markets Overview

UK 100 called to open -45pts at 7115, extending yesterday’s sell-off from 7150 after a break-down from March’s rising channel. Bulls need a break above 7140 for confidence in a return to 7200 week highs. Bears require a breach of Monday’s 7095 lows to open the door to 28 Feb lows of 7040, and the floor of the post-Christmas up-channel. Watch levels: Bullish 7140, Bearish 7095

Calls for an negative open come after Asian markets had their worst session since October (China -4%, Japan -2%) after Chinese Exports plunged 20.7% YoY in Feb (vs. -4.8% est.). This adds to global economic growth worries and follows a very dovish/downbeat ECB policy update yesterday that saw equities resume their slide.

In corporate news this morning:

Ocado may react to a profits warning from US grocer Kroger (-14% overnight), with which it has a tech/distribution partnership. Digital sales +58% QoQ, but taking longer to convert into profits.

Sports Direct calls for removal of Debenhams board (excl. CFO) to allow Mike Ashley take over as CEO. He would step down from Sports Direct, replaced by deputy CFO.

RPC agrees to 793p cash takeover from Berry, withdrawing from prior 782p deal with Apollo. Serco signs contract worth up to $200m over 4 years to support US Pension Benefit Guaranty Corp.

Vodafone’s Chief Technology Officer has told the BBC that a complete UK ban on Huawei equipment would delay 5G deployment and cost the company hundreds of millions of pounds.

Barclays launches Algorithm BARX Peg; allowing clients to minimize both the spread paid and market impact by accessing unique Barclays franchise liquidity pools.

GlaxoSmithKline reports positive data from ViiV Phase III injectable studies to treat HIV. Both met primary endpoints, showing 2-drug injectable combo has similar efficacy to 3-drug oral treatment.

S&P cuts Indivior outlook to Negative on increased generic competition for Suboxone (80% sales). S&P also puts Daily Mail on watch Negative on plans for Euromoney stake distribution, cash reduction.

Bodycote 2018 revenues +5.6%, operating & pre-tax profit +12%, cash flow +17%, final div +9%, special div -20%; conscious of macro backdrop, well positioned, 2019 expectations unchanged.

SIG FY underlying revenue -1.2%, like-for-like sales -2.1%, underlying pre-tax profit +8.5%, net debt -26.8%. Final div flat. To review “strategic options” for Air Handling. Challenging trading, uncertain outlook with like-for-like sales declines in H1’19. Transformation on-track.

Polymetal FY ore reserves +15% (gold share: 93%), mineral resources +44%, average ore grade unchanged, mineral grade +8%. Evaluating possible exploration JVs with junior explorers in 2019.

In focus today:

US Non-Farm Payrolls Jobs report (1.30pm), expected to normalise to the 180-200K range after last month’s surprise jump (from 222K to 304K). As always, look out for revisions which can significantly alter the net change over the last 2-3 months.

While the US Unemployment rate is forecast to tick up to 4% (from 3.9%) Average Hourly Earnings (3.3% vs 3.2% prev) could accelerate positive for inflation and the USD. Housing starts and Building Permits growth are also a barometer of US consumer confidence.

Fed Chair Powell (2pm, centrist) speaks on Monetary Policy Normalisation. We also have several ECB members, following a dovish Draghi yesterday, including Nowotny (8am, hawkish) and Mersch (4:30pm, exec. board, hawkish, “Let’s Talk Europe” conference).

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