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

UK 100 Index called to open +15pts at 7175, bouncing fresh 2-day lows of 7150 overnight to overcome yesterday’s falling highs resistance. This still leaves us in a 3-day up channel, a breakdown from which could mean a bearish flag to below 7100. In the meantime, though, range-trading potential remains 7160-7200. Bulls want to see a break above 7180, for a rally back to 7200. Bears want to breach overnight lows of 7150. Watch levels: Bullish 7185, Bearish 7145.

Calls for a positive open come thanks to broad gains in Asia which bucked mixed trading in both the US and Europe yesterday. The fact that both Dow Jones Industrials and Transports made fresh record highs is also seeing the merits of Dow Theory being fiercely debated as a bullish signal in light of the trump stimulus and reflation trade.

In corporate news, surprisingly strong Q4 profits from Swiss investment bank UBS may help sentiment towards fellow financials while we have M&A with UK Grocer Tesco buying food wholesaler Booker for £3.7bn (cash + new shares) and the grocer planning to resume dividends in the financial year 2017/18 after a 2yr hiatus. After BT said Tuesday that its Italian scandal was worse than expected, it looks to have met Q3 consensus for revenues but missed on profits (adj, EBITDA).

Australia’s ASX is outperforming as it plays catch-up from holiday even if metals prices are hindered by a Dollar rise, while Japan’s Nikkei pushes north on a weaker Yen. There is also some holiday optimism in Asia the region ahead of the Lunar Year holiday (Hong Kong, China already closed), further boosted by that welcome US Dollar rebound depressing major peers.

A mixed session for US equity markets saw the Dow Jones post another day of fresh intraday and closing highs, further helped by a Dow theory confirmation as the lesser followed Transportation Index also reached a fresh high, while the S&P 500 closed lower despite it also notching a fresh intraday high. Pharmaceutical strength following Johnson & Johnson’s acquisition of Switzerland’s Actelion led the country’s blue-chip index higher by 0.2%, while the continued deluge of earnings releases saw both the S&P and Nasdaq indices close lower, as Tech giants Alphabet and Microsoft posted (at least in their terms) disappointing results.

Crude Oil prices have maintained a breakout from 2017 falling highs resistance on the back of the surging US stock markets, fuelling hopes of greater demand from the world’s number one economy. However, concerns of vamped US production still weigh, putting increased focus on this evening’s Baker Hughes Rig Count for a confirmation of the ongoing uptick following last week’s 4 year high reading.

The slide in Gold price continues as the precious metal looks to complete a double top reversal pattern confirmed yesterday morning that could take price back down to $1175. A strengthening US Dollar overnight further hampers sentiment, while volumes will be considerably reduced with China enjoying a long weekend of lunar New Year celebrations.

In focus today will be the preliminary figure for US GDP (1.30pm) while UK PM Theresa May’s meeting with US President Donald Trump across the Atlantic this afternoon could provide some details on a potential new Transatlantic trade deal alongside the usual sound bites as to how the two countries’ “special relationship” can be revamped in the Trump era.

The US GDP figure is expected to have cooled off somewhat after Q3’s greater than 2% surge in growth to 3.5% as the US Fed look to begin a gradual course of rate hikes from 2017 to 2019. Any upside surprise will most likely be jumped upon by the Trump team as an indication of the strengthening of the US economy, however a fall in Personal Consumption levels could highlight some economic uncertainty in the world’s largest economy.

Also today, US Durable Goods Orders are once again expected to swing into positive territory as Trump looks to inspire a resurgence in US manufacturing, although consensus for a 2.6% increase remains shy of October’s 2016 high, while the University of Michigan Sentiment at 3pm is seen unchanged. Rounding off the week’s macro data, the Baker Hughes Rig Count will be closely scrutinised following last week’s largest weekly increase in 4 years, as rising concerns that US crude oil production will offset the impact of OPEC’s production ongoing cuts on global supply dampen investor sentiment.

Away from the US, other speakers of note today include the ECB’s Costa and the Riskbank’s Skingsley.

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

• Tesco to buy UK wholesaler Booker for £3.7bn
• Oaktree Capital sells 10% stake in Countryside – Bookrunner
• UK lender Paragon reports Q1 profit in – line with its expectations
• Crisis – hit BT seeks to reassure investors with strong consumer growth
• BT Europe head leaves after accounting scandal, Italy head appointed
• Alliance Trust to buy back shares owned by US activist fund Elliott
• Spain's Banco Sabadell 2016 net profit stalls on mortgage charges
• Copper slips on firmer dollar in holiday – thinned trading
• Oil prices dip as rising U.S. output offsets OPEC – led cuts
• Gold hits 2 – wk lows on dollar strength; set for 1st weekly drop in 5