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

UK 100 Index called to open +30pts at 5665, in a shallow rising trend from yesterday’s revisit of January 3yr lows 5600. The bounce back from bear market territory will give hope to the bottom-picking bulls. The bears, however, will point to this merely as a new channel below an old channel and still in indisputable downtrends for February, for 2016 and for the last 14 months.  Watch levels: Bullish 5710, Bearish 5590.

The positive opening call comes after a break-even US session and despite weakness in Asia where both the Japan’s Nikkei and the Aussie ASX dropped into bear markets, down 20% from their last peaks with financials and commodity-linked names under pressure from fears of global recession and another banking sector crisis.

While market volatility maintained the equity market rout, notably in financials as fears over the banking sector grow, a stronger JPY from safehaven interest (has the Gold reversal peaked?) hindered Japanese names, while renewed Oil price weakness added to the fray ahead of US stockpile data.

US indices still volatile with futures doing well this morning, while the longer term downtrend is not threatened. Fears were stoked ever higher yesterday by the banking sector while Iranian chat about oil production cuts buoyed crude prices, but not by much and certainly not enough to help general market sentiment.

The job of reassuring markets was moved up the chain to White House economic adviser Furman, who took over from the Fed to talk about the government’s readiness to step in with a fiscal policy toolbox to ‘ease another economic downturn.’ Note Yellen testifying later today. Expect the tone to be dovish.

This all adding to ECB chat about a ‘cloudy’ economic outlook’ in the region where everyone thought the opportunities would lie in 2016. There’s still time for that though...   

In focus today, the main event will be Fed chair Yellen’s testimony to US Congress with markets looking for updates on potential US monetary policy direction given the 2016’s financial market volatility and extension of negative rates to Japan. Data-wise, UK Industrial and Manufacturing Production is seen delivering a mixed picture with muted contraction and growth respectively in December. Thereafter, US Oil stockpiles could move the oil price should inventories remain high or indeed drop.

Crude prices recovered by $1 overnight after Iran talked about production cuts, which apparently counts as a rally. Note though that gains have since been capped around $31 for Brent and $28 for WTI with, again, no fresh fundamental drivers to speak of. Keep an eye out for more attempts by producer nations to manipulate the oil price with their words - it’ll provide trading opportunities.

Gold is flat, an indicator of where much of the recent buying may have originated from (China - it’s currently on holiday). $1200 the key level to watch for the foreseeable, while there’s potential for a greater pullback on lower volume before the inevitable resumption of the uptrend - again, the fundamental drivers have not changed. As mentioned above, Yellen is likely to talk dovish later today, which will likely weaken the USD.

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