No Turkish delight for the lira

Calls for a positive open come in spite of a mixed start to market trading in Asia (Japan down, Australia flat, China mixed) ahead of upcoming talks between US and Chinese trade delegations in Washington to discuss defusing the ticking time bomb of the global trade war.

No Turkish delight for the lira

FTSE 100 Index called to open +20pts at 7570, continuing the rebound from August lows, though still holding near the ceiling of the 3-week falling channel. Bulls need a break above 7582 overnight highs to break out of said channel. Bears require a breach 7650 overnight lows to once again challenge Friday’s 7514 lows. Watch levels: Bullish 7600, Bearish 7530

Calls for a positive open come in spite of a mixed start to market trading in Asia (Japan down, Australia flat, China mixed) ahead of upcoming talks between US and Chinese trade delegations in Washington to discuss defusing the ticking time bomb of the global trade war.

Turkish lira is back to trading lower after the US rejected Turkish proposals to swap jailed American pastor for assurances of sanctions relief, and Fitch and Moody’s rating agencies downgrading Turkish credit rating to “junk” status due to soaring inflation and rising trade deficit.

Likelihood of “no-deal” Brexit came back into the fore, as the Telegraph reported that the UK government has started negotiating potential terms for access to EU market for medicines, car parts and chemicals in case no formal Brexit deal can be reached.

FTSE Housebuilders could be sensitive today to overnight news of Rightmove House Price index falling 2.3% MoM (steeper than 0.1% MoM fall in July). Stronger USD against the basket of peer currencies is hurting the commodity space, with copper, oil, and silver all trading lower this morning. That said, gold and the Japanese Yen are rebounding from recent lows due to cautious investor sentiment feeding interest in safe havens.

In corporate news this morning NMC Health H1 revenue +20.2% YoY, EBITDA +32.1%, profit margin +220bps, total patient visits +20.3%, revenue per patient +5.2%, occupancy +80bps. Acquisitions and strong demand are driving a strong positive outlook for H2 2018. Reviewing earlier FY guidance upwards (update expected in late October).

Paddy Power Betfair completed the first tranche of the £200m share buyback programme and commences a second £300m tranche. John Wood Group awarded a 6-year maintenance contract by Royal Dutch Shell’s production unit in the Philippines, which will create 60 new positions.

Mulberry said its FY profits could be “materially reduced” by tough UK retail trading conditions and expects to book a £3m exceptional cost in H1 due to House of Fraser restructuring. LondonMetric Property acquired two urban logistics warehouses for £23.5m in Avonmouth and Cambridgeshire.

Polymetal International announced the first shipment of 2000 tonnes of gold concentrate from Kyzyl to China, with 150 kt per month capacity expected to be achieved in October. Development of Premier Oil’s Tolmount Main gas field in the North Sea has been approved by JV partners, with company’s CapEx share estimated at $120m in project management and drilling costs.

With the summer lull still ongoing, the rest of today will be fairly light on data and events, with only the German Bundesbank’s Monthly Report (11am) of significant interest to investors. Additionally, look out for Eurozone Construction Output (10am), expected to slow down in June to 1.6% annual growth, interrupting an accelerating trend seen in March-May.

In speakers today, Atlanta Fed President Bostic (4pm, voter, centrist) will discuss the US economic outlook in a fireside chat at Bristol Chamber of Commerce in Tennessee, with audience Q&A scheduled.

The rest of the week brings some interesting macroeconomic data in focus, however. On Thursday, watch preliminary Manufacturing and Services PMIs from major Continental economies (France, Germany, and Eurozone as a whole), as well as from the United States. Manufacturing sectors in both Europe and the US are expected to contract in August, but Services are forecast to grow.

Also keep an eye on the release of monetary policy meeting accounts/minutes from both the Fed’s FOMC (Weds, 7pm) and the ECB (Thurs, 12:30pm). Since neither meeting produced an interest rate hike, investors are interested in the tone (hawkish? dovish?) the two Central Banks take with regard to the direction of their respective economies and their interest rate policies.

With USD rallying robustly in the recent weeks, a less than upbeat assessment from the Fed could undermine market confidence and see a potential retreat for the USD against peer currencies. From the ECB, markets are expecting a reiteration that previously scheduled halving of the QE stimulus programme in September is still on track. Watch both USD and EUR crosses.

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