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

UK 100 called to open +50pts at 6270, having rallied overnight to build on yesterday’s 6220 breakout from the May sideways channel to post fresh 3-week highs. The breakout offers the distinct possibility that we see a repeat of the March/April triple bottom which completed around 6350 and even went on to deliver 2016 highs at 6430. After such a sharp move higher (+2.8% from yesterday’s lows), beware the risk of a short-term pull-back for digestion. Watch levels: Bullish 6285, Bearish 6240.

A positive opening call comes after Asian bourses rallied overnight following a strong US finish with a jump in oil prices thanks to a US API stockpile drawdown helping bolster bullish sentiment. Energy stocks thus leading the way followed by financials and technology (Nasdaq +2%). It would appear that markets have either resigned themselves to another US rate hike this summer or are taking comments from the army of non-voting Fed hawks with a hefty pinch of sceptical sodium chloride.

Japan’s Nikkei and the Australia’s ASX are being helped by a buoyant Energy sector and a flat Yen and Aussie dollar despite the influential US dollar basket pushing north through 95.5, stifling metals prices to result in mixed raw material performance. China stocks flat after the PBOC fixed the renminbi currency at its weakest since 2011 to counter current dollar strength (they will of course say otherwise) while Hong Kong's Hang Seng powers on via Energy sector strength.

US bourses crawled upwards, tracking European equities and oil higher with risk sectors financials and tech leading gains. A banging New Home Sales print also helped stateside bourses. Again we’re seeing the Fed extolling the virtues of the strong US labour market to make the case for raising rates in June. Note St. Louis Fed’s Bullard (an actual  voting member) saying June is not ‘set in stone’ though - after a couple of weeks of hawkish chit-chat, is it time for the doves to have their say again?

Following yesterday’s API stockpile data, crude oil traders are betting on official EIA government data to show a drawdown in US inventories, this compounding existing supply outages to keep the price supported. Note Brent ($49.3) now trading slightly below WTI ($49.4).

Gold continues to decline (plumbing 7-week lows) on a firmer USD and with a very much risk-on mood pervading markets through yesterday and today. If both continue, we can expect a break below $1220 and further downside to $1210 and perhaps even $1200.

In focus today will be a host of ECB speakers trying to steal the limelight from Fed peers, although given the region’s growth and inflation travails they are nowhere near being able to vie for any type of hawkishness. Germany’s IFO Business Surveys will be of interest in light of mixed reads from yesterday’s ZEW surveys and the nation’s importance within the wider Eurozone region. Only marginal improvements expected.

Fed speakers are still hogging the newswires, albeit still only the non-voters, with Harker up again mid-afternoon, before Kashkari around the European close and Kaplan mid-evening. Note potential for their comments to move the dollar and/or US rate hike expectations. Just when you thought things had calmed, with fears about a June hike receding. Or is it now being accepted/priced in?

Afternoon data includes US House Prices seen posting another batch of solid growth in March, bolstering the impressively strong April New Home Sales figures we saw yesterday. Thereafter, US PMI Services is seen remaining solidly in growth.

No change expected for Canadian interest rates but US Oil Inventories could help the price of barrel to hit $50 should we get a drawdown in-line with last night’s API stocks drop. Note, however, that EIA data failed to mirror the API drawdown posted last week with a surprise EIA stock-build denting sentiment.

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

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