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

UK 100 Index called to open +20pts at 6805, having made a late test of 6800 before weakening to 6780 overnight. Support holding around 6730 which maintains sideways channel from 21 Jan, however, overnight failure to better 6800 keeps falling highs and downward bias from 28 Jan. The bulls are still hopeful that activity since 25 Jan is merely a pause within a bullish flag pattern, while bears are looking for a breakdown. Updated Watch levels: Bullish 6820, Bearish 6710.

The positive open comes from more accommodate central bank moves with the Royal Bank of Australia (RBA) unexpectedly cutting rates to a record low while Oil posted further rises and optimism rose regarding a Greek solution to its debt woes. Note positive results this morning from Spain’s Banco Santander (SAN) which could help the banking sector, but BP (BP/) cutting capex after profits hit by falling oil price.

US bourses closed higher with energy stocks continuing to benefit from further rises in the price of oil from recent multi-year lows and despite OPEC delegates warning against depressed prices until summer. Note President Obama announcing a $4tn 2016 fiscal budget to improve infrastructure and boost middle classes funded by tax increases on business/wealthy, but cut growth and inflation forecasts.

While earlier US sentiment hurt by domestic data supporting the Q4 GDP miss and worries about slowing growth continuing into Q1, it was boosted by ECB’s Noyer saying more accommodative repayment terms may be possible for Greece, adding to Greek Finance Minister Varoufakis’ hopes of a deal (exchange debt for growth-linked bonds) soon, settling issue once and for all, even if Germany rejects any one-sided changes.

Overnight, data included a much-improved Australian Trade deficit and less weak than expected Building Approvals, but a dip in Consumer confidence while the RBA unexpectedly cut interest rates by 25bps to a new record low 2.25% (AUD/USD fell to near 6yr low) to prop up an economy growing ‘below trend’. It joins global counterparts in keeping monetary policy easy to counter the wave of deflation threatening markets.

Asian stocks mixed, with Australia’s ASX near a 7yr high following the RBA rate cut with the weaker AUD helping exporters of now lower priced commodities while the higher crude prices helped oil-related stocks. Note Japan’s Nikkei in the red and Hang Sang only just positive, failing to take the US lead, remaining subdued on global growth concerns.

In focus today we have Eurozone Producer Price Inflation (PPI) expected to have come under more pressure in December, vindicating the ECB’s recent QE launch. US Factory Orders will be closely watched, given the recent negative data stateside and fears of a Q1 slowdown.

Gold still struggling to overcome $1280 due to trend of falling highs from 22 Jan, although the trend of rising lows could work in its favour for a breakout. The narrowing formation could be considered a continuation of the prior trend. Note the strong USD still a hindrance to safehaven seeking derived from uncertainty about global growth and monetary policy divergence although Greek PM Tsipras’ intent to comply with its EU creditors has also pushed down demand for the safehaven metal in the Eurozone.

Oil continues to benefit from the fallout from the Baker Hughes rig count on Friday and a strike at 9 US refineries, and fails to be perturbed by weak macro data or OPEC delegates warning of depressed pricing through the summer due to weak seasonal demand. Note WTI $50/barrel and Brent $55.5 with the former approaching prior mid-Jan highs and the latter having made a break from its sideways channel.

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

• Australia              Trade balance                    Beat, Deficit narrowed
• Australia              Building Approvals           Beat, less weak
• Australia              RBA rate decision             Surprise cut

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

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

• Petroneft says Tungolskoye No. 5 well is now in production
• UK online grocer Ocado makes first annual profit
• APR Energy renews Indonesian power generation contracts
• Melrose to return 200 mln stg to shareholders
• TalkTalk Q3 revenue up 4.2 percent on quad-play demand
• Aberdeen funds under management falls to 323 bln stg
• UDG Healthcare says Q1 trading well ahead of prior year
• Capita to acquire avocis for 210 mln euros to expand in Germany
• BG books $6 billion impairment charge on weak oil
• AB Foods to take 98 mln stg writedown on Vivergo Fuels J/V