Market buzz: UK inflation drops, FTC said to be probing Facebook

1539: Facebook down 5.57%, Google off by 0.68%. Commenting on the company's current predicament, analysts at Macquarie are telling clients: "We are not lowering our near-term revenue or earnings estimates based on these headlines. However, we are very much concerned that the systemic risk around data-driven online advertising and specific concerns about FB's data are rising quickly. While difficult to quantify in a meaningful way, this increased risk will manifest itself financially in the discount rate."

In particular, they cite three risks which cause them concern: (1) Political/regulatory/legal risk rising globally, (2) The zeitgeist evolving around social media and (3) "most importantly", FB and Zuckerberg's potential response and self-imposed remedies."

1335: Some excerpts from the latest monthly BoA-ML fund managers' survey:

- Average cash balance edged lower from 4.7% in February to 4.6% for March

- Funds allocated to banks at second-highest level ever

- Pessimism towards UK hits all-time high, 42% of managers underweight the region

- 30% concerned by threat of 'trade war' (highest since January 2017), Inflation (23%), Slower global growth (16%)

- For first time since 2009, majority of managers do not expecte Yen to depreciate; majority (26%) still overweight Japanese stocks

Michael Hartnett, BoA-ML's chief investment strategist, says: "Investors have yet to act on these fears, however, as rates and earnings are keeping the bulls bullish.

"Cracks in the bull case are starting to emerge, with fund managers citing concerns over trade, stagflation and leverage," said Michael Hartnett, BoA-ML's chief investment strategist."

"Investors have yet to act on these fears, however, as rates and earnings are keeping the bulls bullish."

1332: According to a report citing Bloomberg, the US FTC is probing Facebook's use of personal data.

1308: Today's CPI number will not be enough on its own to change the Bank of England's interest rate plans, says Barclays, as Mark Carney is confident is his ability to 'look through' walls of unsupportive data before needing to alter course.

"More important may be this week’s labour market report as an upside surprise in wages would support a earlier hike while an equally likely, in our view, downside surprise in job creation would call for holding off a premature hike."

1237: The Financial Conduct Authority has underlined its readiness to clamp down on banks' high overdraft charges that disproportionately affect the least well-off. Christopher Woolard, head of strategy and competition, said the FCA’s research showed there was a case for “fundamental reform” of unarranged overdrafts.

1224: The London midday market report for Tuesday (more companies mentioned than any other market report, we reckon) shows the FTSE 100 holding on to gains, helped along by more deal news and with analysts divided over whether the softer-than-expected UK inflation print will ease pressure on the Bank of England to raise rates in May.

The FTSE 100 was up 0.5% to 7,074.88, while the pound was down 0.1% versus the dollar at 1.4009. Sterling was up 0.2% against the euro at 1.1393.

Top of the leaderboard is British Land, the retail and office property developer, as M&A interest in the sector is piqued by the offer for retail developer Hammerson from France's Klepierre.

1218: Earlier, Virgin Money and Aberdeen Standard Investments announced the formation of a joint venture to provide asset management services to customers. Shares VM are higher, as is SLA.

1216: The US pre-open market report for Tuesday sees stocks on Wall Street looking set for a positive open on Tuesday following heavy losses in the previous session, with the tech sector likely to be in focus again as the latest revelations about Facebook spark concerns of tighter regulatory controls.

Facebook is down 1% in premarket trading. In connected news, the UK’s Information Commissioner seeks a court warrant to search Cambridge Analytica's London headquarters after a hidden camera video broadcast by Channel 4 showed the firm’s chief boasting about the use of honey traps and bribery to damage politicians.

1201: TUI shares are higher as the tour operator said strong growth in cruises continued and it planned for "faster expansion", with the overall fleet to grow to 18 ships by 2023.

1111: Broker SP Angel notes Tesla’s Model 3 electric vehicle is marking a shift towards incorporating a permanent magnet electric motor versus its previous AC induction motors, boosting the neodymium-iron-boron magnet market to an estimated $11.3bn.

Tesla aim to provide the world’s first “mass-market electric vehicle”, which Angel says will create strong demand, particularly for ‘magnet-dominant’ rare earth element miners including AIM-listed Mkango Resources which hosts 26.6% neodymium in the Songwe Hill project.

Angel analysts also note fading China property data "is sapping demand from base metals", as the number of Chinese cities reporting stronger house prices on Monday showed the lowest level in five months.

1052: More entrants into the royal rates rumble, with Howard Archer of the EY Item Club saying he does not expect it to discourage the MPC from hiking interest rates in May. Laith Khalaf at Hargreaves Lansdown in on the same team, we think, as he's hedging his bets. He says "in theory" the CPI print relieves some of the pressure to raise interest rates, but as the MPC expects inflation to fall the latest figures "don’t really alter what we can expect from the Bank in the coming months"...but hiking now would allow the Bank leeway when the next slowdown arrives. "Responding to an economic slowdown doesn’t mean causing one however, so the Bank will proceed very cautiously with rate rises, lest it upset the applecart."

Jacob Deppe, head of trading at online trading platform Infinox, is hopping from one side of the fence to the other. The CPI print "may relieve some of the pressure for an interest rate hike" but if Q1 GDP surprises everyone next month by being stronger than expected, the Bank could well hike rates in May. He sees the MPC as "highly unlikely" to agree to hike rates yet. “But there may well be one or two dissenting voices on the Committee calling for a hike this month, which might give us a clue as to whether the Bank could do so later in the spring."

1048: Copper prices update today sees them creep up to $6,832 per tonne versus $6,826/t yesterday.

1036: Shares of Sophos fast approaching 50% Fibonacci retracement, towards 410p, of their move higher since June 2016.

From a more (arguably) fundamental standpoint, on Monday Bloomberg cited Northern Trust Capital Markets analyst Ameet Patelasking as having said that attention was turning to Sophos's stretched balance sheet, slowing sales momentum and debt-funded acquisitions.

Those, he said, signaled a "grand slam of red flags" rising.

On the back of that, Patelasking initiated a 'trading sell' on the shares, after having been at a 'buy' since it floated in 2015.

"There's enough here for investors to question near-term," Bloomberg has him down as saying, while pointing - among other aspects - to its net debt at a "punchy" four times to analysts' fiscal year 2018 forecasts.

1028: After February's UK core CPI eased off more than expected to 2.4%, economists are rather divided over what it meant for the BoE monetary policy committee meeting this week.

Britain "still doesn’t have an underlying inflation problem", says Sam Tombs at Pantheon Macro, and GDP, labour market and retail sales data all have been weaker than anticipated since the last meeting, so he thinks the MPC "will refrain from ratcheting up its guidance and won’t clearly signal an imminent rate rise in the minutes of Thursday’s meeting, prompting markets to reassess their view that the chances of a May rate hike are as high as 80%."

Nope, says Paul Hollingsworth at Capital Economics. "We don’t think that the CPI outcome significantly reduces the chance of an interest rate hike in May", he says. With Mark Carney and co focussing more on wage growth recently, if Wednesday's figures reveal another pick-up, as expected, Hollingsworth was confident the MPC will raise interest rates again at its meeting in May.

Chris Williamson at IHS Markit still sees enough in the economy to lead to a hike, as does Adam Chester at Lloyds Bank Commercial.

0956: On today's bid for Fenner from across the Channel, analysts at Citi say a counter-offer is unlikely given the cash nature of the proposed transaction and the premium offered.

0954: Credit Suisse's equity strategy team led by Andrew Garthwaite has marked-up its year-end target for the MSCI AC World index from 614 to 628.

Despite current "extreme" equity valuations on an absolute basis, they point out - among other things - how the majority (80%) of bull markets since 1970 had peaked when the rate of unemployment fell below the so-called NAIRU. But that rate was 3.5% on their estimates, not 4.6%.

"We would stress that those geographies which have tighter labour markets than the US have not seen wage growth pick up. The critical issue is when wage growth rises above 3.5% (2.6% currently)."

As well, over the past 50 yaers all bear markets had coincided with an economic recession, but for now the modelled recession probabiliteis remained very low, they said.

"The sector that has led the market is not expensive (tech's P/E relative is close to average). Tech is the defining characteristic of this cycle."

0931: UK inflation cooled off more than expected last month, bringing some positive news for the Bank of England before it meets to decide on interest rates this week.

February's consumer price index rose 2.7% compared to the same month last year, down from 3.0% a month earlier and lower than the market's expectation of 2.8%. CPI was up 0.4% month-on-month, which was also lower than the 0.5% average forecast from economists.

When excluding more volatile prices, such as fuel as food, the Office for National Statistics said core CPI eased off to 2.4% in February from 2.7% in January, again beating the market consensus, which had pointed to 2.5%.

0928: Interesting piece in the FT yesterday about how governments, car manufacturers and consumers "pushing" for electric vehicles and so are "in danger of radically over-estimating the potential effects of EVs on oil demand and simultaneously under-estimating the wider implications for the commodities supply chain". Continues that if the EV fleet rises from 3m vehicles today to 40m by 2030 this might curb oil consumption by just 1% of expected global demand.

0856: UK telecoms regulator Ofcom kicks off the 5G mobile auction today, with five companies bidding for spectrum in two frequency bands: Airspan Spectrum (from the US), EE, Hutchison 3G UK, Telefonica and Vodafone.

The first band, 2.3 GHz, can be used by mobile companies as soon as it is released, to increase mobile broadband capacity for today’s mobile users, while the second is earmarked for 5G. During the auction, companies will bid for ‘lots’ of spectrum over a series of rounds in coming weeks. More on this later.

0856: Yesterday's Facebook-inspire "tech tantrum", which saw the biggest fall in the Nasdaq for five weeks, could be repeated in coming weeks and months says Deutsche Bank. The Facebook data leak, plus news that Apple was developing its own screens and the European Commission was proposing large digital companies operating in the EU could face a 3% tax on gross revenues added to the pain for the sector and "seemed to ricochet across other markets", with the S&P 500 down for the fifth time in the last six sessions, the Stoxx 600 down 1.07% and DAX down 1.39%, while the VIX also spiked and credit indices weren’t immune either, with 10yr Treasuries rallying nearly 5bps from early highs.

"So some decent moves," Deutsche's Craig Nicol says. "Yesterday might well be an isolated case but it fits in with our view that we are likely to see more tantrums in markets this year, certainly relative to the incredible calm that was 2017."

0840: The London open market report shows the Footsie up 0.4% to 7,071.97 even as the pound climbs a further 0.2% against the euro and the dollar. There's also broker note action as Gem Diamonds and Petra Diamonds are lifted to 'buy' at from Citi, and Micro Focus to 'hold' from Credit Suisse. More details available in the report on IMI, National Grid, Fenner and on Barclays.

0826: The M&A bonanza continues, with Fenner shares screeching higher on the back of a deal this morning. French tyre manufacturer Michelin has agreed to buy the UK engineering company in a deal worth around £1.3bn.

Elsewhere Micro Focus is bouncing back, Ocado is down on slightly softer Q1 results, there's more tit for tat in the GKN-Melrose game of corporate ping pong and FTSE 350 newcomer Charter Court Financial Services is a leading riser on the back of its results. The FTSE 100 is up 20.64 points or 0.29% at 7,063.57.

0805: In focus for the day ahead will be UK consumer price inflation at 9.30 GMT, which is forecast to have rebounded in February to 0.5% month-on-month from January's fall of 0.5% but ease off on an annual basis, for both headline (2.8% vs 3% previously) and the important core CPI metric (2.5% vs 2.7% prev). "The data is key in terms of inflationary pressure and the BoE alluding to a looming rate hike that could come as soon as May. Watch GBP," says Mike van Dulken at Accendo Markets.

Rabobank said that barring a far sharper drop in UK inflation, they would not expect too much market reaction from this release, given the scheduled BoE policy announcement on Thursday. "Although steady policy is widely expected from the BoE this week, the market will be looking for clues as to the MPC’s position ahead of the forthcoming policy meeting in May," analysts at the Dutch bank. "As it stands, the market see a strong chance of a 25 bps rate rise in May, though the MPC is assuming that wage inflation picks up. Although we see risk that the MPC will position itself for rate hikes in both May and November this year, the chances of a second 2018 hike is dependent both on strengthening wage data and on the assumption that the Brexit negotiations are smooth."