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

UK 100 Index called to open +30pts at 7295 futures having rebounded overnight from a weak close to extend February’s rally and challenge Monday’s 7300 highs again. A break above this could open the door for recovery to January’s 7365 all-time highs. Bulls will be looking for inspiration in the form of a break above 7302 overnight highs; Bears likely want to see support at 7282 give way. Watch levels: Bullish 7305, Bearish 7280.

Calls for a strong European open come after US bourses recorded solid gains which Asian counterparts have built on, even outperforming overnight. Bullishness stems from hawkish testimony by Janet Yellen, Chair of the US central bank (Federal Reserve) giving a fillip to a key financial sector whose profitability benefits from higher interest rates.

Her boost to the USD has resulted in the EUR falling lower and kept GBP under pressure to the benefit of both the DAX and UK Index respectively, even if she caveated her rate-rise prepping chat (markets see March as a possibility, pricing in June as a given) with uncertainty for the US economy about how government policy pans out.

Japan’s Nikkei is outperforming thanks to gains for financials and a weaker Yen helping exporters. Australia’s ASX is also gaining nicely, financials outweighing a flat metals space hindering Miners and oil prices giving up ground yesterday on account of a stronger USD and another big build in US API inventories overnight to cloud the outlook for crude.

The rally in US equities continued overnight, as Wall Street’s four main indices once again closed at fresh record highs. Yesterday’s performance was heavily influenced by comments from Fed Chair Janet Yellen, causing the Financial sector to outperform on all indices. A particular mention goes to Goldman Sachs as the financial behemoth reached a 10-year share price high, leading the blue chip Dow Jones 0.5% firmer alongside the S&P 500 (+0.4%), Nasdaq (+0.3%) and Russell 2000 (+0.3%).

Crude Oil prices have returned to Monday’s lows as overnight industry inventory data showed a larger than expected build in crude inventories once again. A 9.9m build against 3.25m expected alongside a clean sweep of builds in other measures (gasoline and distillates) pushes this afternoon’s official US Government data (3:30pm) even further into the spotlight to halt the commodity’s sell-off in the face of a stronger dollar.

Gold price continues to fall as a trio of bearish triggers weigh on investor sentiment. Hawkish Fed speak from Chair Janet Yellen (hinting that a March rate hike could still be on the cards), the ongoing equity rally in the US markets and a stronger Dollar are all contributing to the precious metal’s decline, which is dragging the precious metal towards $1222 resistance-turned-support, even as rising geopolitical uncertainty would normally see safe-haven asset demand buoy prices.

In focus today will likely be the second day of Fed Chair Janet Yellen’s Testimony, day one having been digested as hawkish, sending the USD to levels last seen on Jan 20. While the EUR has since sold off to help DAX futures, note GBP remains rather resilient holding the UK Index back from bettering Monday’s highs.

Data-wise, the UK Jobs situation is seen largely unchanged in terms of Jobless Claims (2.3%; Jan) and Unemployment (4.8%; Dec) but up on the employment front (+22K; latest 3 months). Most importantly wages growth is seen holding firm, well above the BoE’s 2.0% inflation target which could serve to buoy the GBP.

With inflation key on both sides of the pond while growth improves against a backdrop of accommodative monetary policy, US Consumer Price Inflation (CPI) will be looked to in light of yesterday’s blowout Producer Price Inflation (PPI) although expectations are for an unchanged headline figure (2.4% YoY) while Core cools a touch (2.1% YoY).

Given their links to Consumer Price Inflation, US Retail Sales will be closely watched given expectations for a slowdown in headline growth whilst Core accelerates and Real Average Weekly Earnings will offer an additional data point on inflationary pressures.

US Industrial Production is forecast slower in January after December’s rebound, much like Business Inventories, while Manufacturing Production and NAHB Housing market index hold firm. After a big build in US API inventories last night listen out for official DoE EIA data this afternoon.

Other speakers include Yellen’s underlings Rosengren and Harker both expected shortly after European market close, Harker having towed a hawkish line yesterday even discussing the Fed trimming its bloated balance sheet.

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

• Anglo American Platinum agrees sale of Union mine to Siyanda Resources
• Prudential bidding £3bn of £12.5bn Bradford & Bingley mortgages sold by UK government – FT
• Pharma industry shuns Trump push for radical shift at FDA
• Toyota to recall all 2,800 Mirai fuel cell cars on the road
• London copper steadies above $6,000 as supply worries persist
• Banks fight for $40m fee pot in advising on Vodafone India merger
• Qinetiq Group says Q3 underlying trading in – line
• NEX Group gets boost from U.S. election outcome
• Heineken retains margin growth target for volatile 2017
• Oil dips over doubts high OPEC compliance with agreed cuts will last
• Gold edges lower after Yellen hints of rate hike