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

  UK 100 Index called to open +55pts at 6443 having recovered from a test of 6350, near early Jan lows of 6330, following a breakdown from the narrowing wedge pattern discussed. The sell-off keeps the downtrend from December intact and while recovery to 6450 is positive and could see the level return to support, we still require a break of 6580 to reverse the overriding declines. Watch levels: Bullish 6510, Bearish 6405.

The positive open comes thanks to most Asian stocks advancing thanks to a rebound by Japanese energy names and exporters (weaker JPY) and a steadying/rebound by oil which outweighed yesterday’s disappointing data print on US retail sales and a poor start to Q4 banks results.

US equities closed lower, although off their worst level, dented by JPMorgan’s Q4 results disappointment knock-on to financials and growth concerns following poor US retail sales data (steepest drop in a year) but assisted by oil’s rebound reviving energy stocks. The US Fed Beige Book had little impact with most districts noted continued economic activity expanding at a modest or moderate pace with no broad pick-up.

While Asia shows Japan’s Nikkei and Hong Kong’s Hang Seng posting gains, helped by speculation of Blackberry and Samsung in M&A talks, Australia’s ASX remains hindered by the continued rout in the metal commodities space and stronger AUD following much better than expected employment data.

In focus this morning we Spanish Consumer Price Inflation which is seen remaining very weak in December and going to reinforce deflationary threats to the region requiring additional ECB intervention. German GDP is expected to show an improvement in 2014 while the Eurozone Trade Surplus may have grown in November.

In the afternoon, US Empire Manufacturing is forecast to rebound in Jan along with the Philadelphia Fed while Producer Prices weaken at the headline but tick up ex-Food and Energy. US Jobless Claims are anticipated pretty much flat on last week’s reading.

Results-wise, after the disappointment from JPMorgan yesterday, today it’s the turn of Bank of America and Citigroup to fly the flag for the banking sector and financials. After the US close, oil exposed Schlumberger and tech giant Intel provide their updates on Q4/FY 2014.

Gold is holding around $1230, off its recent 12 week highs of $1244 for the second time in 2 days as despite equity losses yesterday. Any break below $1225 could open up the possibility of a double-top pattern completing around $1205 recent lows. Safehaven demand still being offset by USD strength (inflation versus rate hike expectations) and commodity price weakness (global growth fears).

Oil prices has moved higher from near 6yr lows (US Crude by most in 2.5yrs) to test $48/49/barrel despite a much bigger build in US inventories (to 80yr high), creating a potential base around $44/45. Beware though of prior recoveries which came to nothing. It’s still a game of chicken between the US and OPEC. Who’ll cut production first? Who can put up with such low prices this for longest? Whose activity is least economic?

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Key Overnight Macro Data: (Source: Reuters/DJ Newswires)

• UK                          RICS House Price Balance             Beat, deteriorated
• Australia              Employment                                      Beat, improved

See Live Macro Calendar for full data line-up, incl. consensus expectations

UK Company Headlines: (Source: Reuters/DJ Newswires)

• Centamin PLC Announces Appointment of Chief Executive Officer
• Retailer Bonmarche posts Christmas sales rise
• Mothercare posts 1.1% rise in Q3 UK lfl sales
• Rexam jointly acquires Envases Del Istmo SA in Panama
• Home Retail reiterates guidance despite weak Christmas sales
• Savills raises 2014 profit forecast
• Petroceltic sees 2015 production range of 16.5 to 18.5 mboepd
• AB Foods expects marginal decline in full year earnings
• Booker Group total sales in 16 weeks rises 1.4%
• Tullow writes off $2.3bn as oil price fall takes toll
• Arbuthnot Banking sees pretax profit in line with or above market expectations
• Lavendon Group sees 2014 results at top end of expectations
• Bovis sees strong run continuing this year
• Experian three months revenue from continuing activities down 1 pct
• Sirius Minerals to withdraw current application for Teesside development consent order
• British regulator says BT must not squeeze rivals in broadband