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

UK 100 Index called to open -10pts at 7180, back from overnight highs of 7200 but equally off the lows of 7175. This range maintains the current 3-day bullish narrowing pattern around 7190, a breakout from which could result in fresh record highs. Bulls need to see falling highs at 7200 exceeded while Bears need to see 2-day rising lows at 7170 give way to open the door for a pullback. Watch levels: Bullish 7205, Bearish 7165.

Calls for a minor pullback come in spite of Wall St gains and a mixed session in Asia overnight as investors digest Fed minutes that suggest both hawkishness and uncertainty in the ranks about the effects of incoming president Trump’s policies on monetary policy and thus rate rise timing.

Note Fed minutes and accompanying investor uncertainty sent the USD Basket back below 102 (markets betting on two rather than three hikes in 2017), to levels last traded in mid-December, and so the resulting stronger GBP and EUR could weigh on the UK Index and DAX today, even if London’s Mining names benefit from higher commodity prices.

Japan’s Nikkei is nursing losses as USD weakness sends the Yen north to the detriment of exporters, a trend that was also visible in China as the Yuan posted its biggest 2-day rally since the turn of the decade. Improved Japanese PMI Services was largely ignored.

Australia’s ASX is outperforming thanks to Oil and metals prices rallying on USD weakness, with Copper delivering a breakout to levels last traded mid last month and non-yielding precious metals building on their recent rebound. Solid China PMI Services data also helps, suggesting stability for the largest Aussie export market.

US Markets closed higher despite the divisive Fed minutes as concerns that the USD was overheating subsided. The Dow Jones once again moved closer to 20,000 as IBM led the index to a 0.3% gain, while the Nasdaq outperformed its peers, rising 0.9%. The S&P closed 0.5% higher as investors looked for apparent bargains in the Consumer Discretionary and Materials sectors.

Crude Oil prices received a welcome boost as US industry data reported the largest inventory draw since September, over three times larger than expected, although the rally began to lose steam upon reaching key resistance levels. Brent crude halted as it neared $56.50 3-week resistance while US crude stalled at $53.40 intersecting resistance. Tonight’s official EIA data, also expecting a draw, should be watched carefully for any similar inventory surprise.

Gold is continuing its post-Christmas surge, with US Dollar weakness helping to further fuel the precious metal’s rally reaching 3.9%. A hesitant reading of the Fed minutes sent the Dollar sharply lower, compounding with rising demand ahead of Chinese New Year to see $1165 resistance broken for the first time since 9 December. Any further USD weakness today could see the rally gain yet more traction.

In focus today: UK PMI Services is key given the sector accounts for almost 80% of GDP. Consensus expects a slight pullback to 54.7 in Dec from 55.2 in Nov which was just shy of 2016’s Jan highs. Whilst still in recovery from July’s post-Brexit lows the indicator has yet to break a longer-term trend of falling highs from its 62.5 peak in October 2013.

After stronger than expected regional Consumer Price Inflation (CPI) yesterday (and from Germany on Tues too) it’ll be interesting to see whether Eurozone Producer Price Inflation (PPI) continues its climb towards breakeven in November (consensus -0.1% vs -0.4% prev), having been deflationary since mid-2013 and as low as -4% in April last year.

In the US this afternoon, ADP Employment data (oft considered a US Jobs report warm-up act) is seen adding 175K jobs in December, back from last month’s 216K but in-line with the rolling average for the two monthly employment indicators.

US PMI Services and ISM Non-Manufacturing are both expected to continue edging back from September’s 2016 highs although the component breakdown of the ISM data may be more interesting (new orders, prices, jobs, activity) as we head towards the Trump inauguration and change of regime.

While US Crude Oil Inventories are expected to show a drawdown after last week’s surprise build, note last night’s API data showed a much bigger draw than expected. Keep an eye on US Crude prices late this afternoon.

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

• Barclays launches mobile phone lending service for small UK businesses
• PureCircle sees H1 group sales down 14%
• Persimmon shrugs off Brexit uncertainty to post sales, revenue rise
• Costain wins place on TFL's new £500m major projects framework
• Costain expects to deliver in – line FY results
• Tullow says finance head on medical leave, names Les Wood as interim CFO
• Aker BP raises Valhall/Hod output ambition by 50%
• Johnson Service sees results slightly ahead of market expectations
• Oil dips on doubts over touted production cuts
• UK car sales hit record high in 2016