UK 100 Index called to open -30pts at 6700, having recovered from overnight lows of 6647 to rejoin a one month 6670-6850 trading channel, however remains in a downtrend that began on Wednesday last week. Bulls will be hoping that a rally to challenge falling highs resistance at 6720 will take place whilst Bears will hope that 6670 support will be broken for the downtrend to continue. Watch levels: Bullish 6730, Bearish 6665.

A negative European open comes as Matteo Renzi confirmed he will resign after Italians yesterday voted overwhelmingly to reject his proposed constitutional reforms. The Euro was placed in the firing immediately, hitting a 20-month low against the USD, whilst wider concern surrounding the health of the country’s banking sector may end up being the biggest concern in the coming days and weeks as recapitalisation plans for the country’s embattled lenders (most notably its 3rd largest lender Monte dei Paschi) come into question.

Elsewhere in Europe, a rejection of far-right politics in the Austrian Presidential election may mark a decided change in sentiment of voters after Brexit and Trump’s election in the US, however the overshadowing of the Italian referendum is likely to gain the headlines as the country’s Five Star Movement celebrates its victory.

All eyes will now be on the Eurogroup meeting in Brussels this morning for reaction to Italy’s referendum result, whilst the ECB’s latest monetary policy update on Thursday (widely expected to result in an extension of its QE policy) will provide an insight into the central bank’s management of the political and economic uncertainty that Renzi’s removal will raise.

Asian markets are sharply lower after the result of the Italian referendum was announced, whilst a series of scathing tweets from US President-elect Donald Trump spurred further declines in the Chinese Yuan. Japan’s Nikkei was 0.6% lower whilst Australia’s ASX (viewed as a  Chinese proxy by many) was the biggest loser, down 1%.

US equity markets finished the week in a lacklustre mood, the European political risk hampering investor sentiment going into the weekend. The Dow Jones shed 0.1% whilst the S&P 500 closed marginally higher as mixed US jobs data failed to buoy investors.

Crude Oil prices are trading sideways having opened lower at the start of Asian market trading, marking the apparent end of the post-OPEC production cut deal rally. Both Brent and US crude retain one-week support however have been unable to break out from respective resistance of $54.60 and $51.80.

Gold, having spiked at the opening of Asian markets overnight, has since pared gains to trade at the lower end of December’s rising $1172-$1180 trading channel as the US Fed’s December FOMC meeting looms large in investors’ minds, especially after Friday’s impressive unemployment reading.

In focus today will be the continued fallout from the Italian constitutional referendum yesterday as Italians rejected PM Matteo Renzi’s proposed constitutional reforms. He will tender his resignation this afternoon, however the process of the Italian President confirming his resignation and beginning the process of forming a technocratic government (or even the possibility of calling a snap election) may take some time.

Macro-wise, throughout the morning we see a range of European Services PMI readings, with figures from the majority of countries (Spain, Italy, France, Germany and the headline Eurozone) seen expanding or unchanged, with the UK’s figure the solitary figure to decrease, although it remain expansionary. Eurozone Retail Sales are released shortly after at 10am, with both the monthly and yearly figures seen increasing, the former moving from negative to positive territory.

This afternoon’s US data is rather light, with the stateside reading of Services PMI seen improving slightly, while Non-ISM Manufacturing Composite and Labour Market Conditions data is released shortly afterwards.

The Eurogroup meets in Brussels this morning, no doubt with the Italian referendum result undoubtedly being the topic under the spotlight, whilst a trifecta of Fed speakers - Dudley, Evans and Bullard - all take to the stand this afternoon. What will be their reaction to Friday’s blowout unemployment reading?

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

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