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

UK 100 Index called to open flat at 6638, still under pressure from a falling resistance line from the 27 Jul high point. The RSI continues to head south under similar falling highs while resistance at the the 50-hour moving average makes it a trio of bearish technical indicators. Sharp eyed bulls, however, will note a potential bullish head & shoulders reversal in formation. A break above the 50-hour moving average and 6655 would confirm this. Updated watch levels: Bullish 6660, Bearish 6625.

A lukewarm opening call for European equities follows a positive session in Asia in which the Nikkei has found respite from a break in the Yen's strengthening trend.

US markets closed higher overnight with the Dow snapping a 7-day losing run. Gains led by the financial and energy sectors after the oil price spiked up on a welcome bit of stockpile data that showed distillate inventories finally easing back - more than expected at that.

The USD has strengthened - perhaps helped by a weaker GBP ahead of today's Bank of England policy update. That has put pressure on Gold which  sold off strongly out of its 2-week bearish rising wedge pattern, with support found at the 100-hour moving average. Mixed US macro data has had a negligible effect on Stateside bourses.

The Chicago Fed's Evans has commented, saying one US rate hike is possible this year. The ECB's Weidmann also talked about altering Eurozone QE if the need arises.

Crude prices are off their overnight highs after spiking up as traders digested a nice big draw-down in US gasoline stockpiles. That being just one part of the story, we're still dealing with a global  glut of crude as demand is seen not keeping up with production. The fact that moves in the oil price are often overdone works both ways...

In Focus today will surely be the Bank of England’s monetary policy update from midday onwards. It seems as if official forecasts are now for a 25bp interest rate cut and no change in the central bank’s QE programme. However many are saying the BoE should throw the kitchen sink at what might after all turn out to be a post-Brexit economic recession.

Banks and financials are sure to be the stocks in focus for their sensitivity to interest rates, especially since so much has arguably been priced in. Pay close attention to the BoE update, since if it’s seen to  under-deliver then financials could pop higher. If Mark Carney does indeed go ahead and cut rates, or goes a step further and ramps up QE then it’s fair to say that financials will stay under the cosh.

Equity indices love economic stimulus in general and traders will be keen to jump on rallies in the UK 100 and Dow Jones futures in the event of ‘enough’ stimulus being offered. Remember that the market has likely already priced in something. Note also that a weaker GBP following a rate cut or other similar action could keep buoying those UK 100 companies that book revenue in US Dollars.

The Dax may come under pressure if GBP does indeed weaken significantly, since this could lead to a stronger Euro which would hit the German exporters that dominate the index.

All in all, a 25bp rate cut may not engender much upside since that's what markets expect and have arguably priced in. Anything more, and the UK 100 could regain 6700, while the outside case - that the Bank of England does absolutely nowt - would almost certainly see UK markets sell off hard.

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