UK 100 Index called to open -10pts at 7035, back from yesterday’s 7046 highs but holding 7028 support overnight. Falling highs since yesterday are a concern but we also have rising lows since midnight. An early breakout could open the door for a bullish flag/pennant that reignites December’s uptrend towards all-time highs of 7135. Bulls require a breakout to 7040 while Bears will want to see 7028 overnight support give way. Watch levels: Bullish 7040, Bearish 7025.

Calls for another flat to negative open come after a mixed Asian session failed to emulate yet another positive US finish, the Dow still knocking on the door of 20,000. Whilst an undertone of traditional year-end bullishness remains, the outstanding issue of a Monte dei Paschi’s rescue, be it via bailout or recapitalisation, remains a hindrance on extension of the current Santa rally.

Whilst Asia opened positive, sentiment has waned overnight as the Yen sees some unwelcome strength to hurt Nikkei exporters. Australia’s ASX is helped by oil prices continuing to edge higher on production cut hopes while industrial metals prices post mild gains despite the USD remaining strong on a hawkish Fed outlook. China firmer after recent weakness.

The Dow Jones came within touching distance of breaking the 20,000 mark, however fell just short in its efforts whilst on its way to a fresh record close. Financials once again led the way, with Goldman Sachs now having contributed 21% of all Dow gains during the post-Trump rally. The Nasdaq posted a fresh intraday all-time high on its way to closing 0.5% higher, whilst the S&P 500 was 7 points shy of a record close, rising 0.3%.

Crude Oil prices are trading marginally higher as overnight industry data showed a larger than expected draw in US inventory stocks, however news that Libya’s national oil producer has resumed operations, potentially adding 50% (270k bpd) to the country’s current output could weigh on sentiment. As always, official US Government inventory data released this afternoon will likely increase volatility after its release at 3:30pm.

Gold price has rallied during Asian trading overnight as the US Dollar retracts from its fresh 14 year highs, having been largely unaffected yesterday by the spate of terrorist events in Europe. The strength (or weakness) of the USD is likely to remain a driving force for the precious metal as it remains in a one-month downtrend.

In focus today will be Italian Finance Minister Padoan speaking at 2pm. Markets wait with bated breath the latest on Monte dei Paschi’s (MPS) struggling recapitalisation efforts to avoid collapse. Speculation suggests it has only 4-months of liquidity remaining.

Should a key debt-for-equity swap for MPS prove unsuccessful by 2pm (the rest of the recapitalisation plan depends on this) an official bailout request for the bank is likely. The timing of Padoan’s speech could thus prove rather prescient. The question thereafter is whether private investors will have to take a hit in spite of what is surely very significant political cost.

Data-wise, UK Public Finances are seen showing November Net Borrowing rising again after a strong tax take pushed October’s figure sharply lower. Nonetheless November is expected to be the its highest in 12 months, putting the government back on course for a full-year borrowing overshoot.

This afternoon, Eurozone Consumer Confidence for December is seen improving slightly to its best level since this time last year while US Existing Home Sales ease from last month’s year highs and US Weekly Oil Inventories give us the latest take on US demand for the commodity.

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

• UK's Meggitt sells defence unit to QinetiQ for $71m
• Coca Cola buys African bottling from AB InBev for $3.15bn
• Telford Homes announces Redclyffe Road property sale
• Petra Diamonds updates on payments to governments for FY 2016
• Vernalis says U.S. FDA accepts CCP – 08 new drug application for full review
• Playtech says bought back 5.28m shares for 50m euros
• John Laing Infrastructure buys stake in Intercity Express Programme
• Dairy Crest announces research partnership with Dupont Industrial Biosciences
• London copper eases further from 1 – month low on demand hopes
• Oil prices edge up on expected U.S. crude inventory draw