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

UK 100 Index called to open +20pts at 7285 testing recent resistance which will cheer the bulls given the potential to challenge falling highs since mid-month around 7300 to open the door for a challenge on January's 7365 record highs. Bulls need a break above 7295 while Bears want to see the index back below 7280. Watch levels: Bullish 7295, Bearish 7275.

Calls for a positive open come thanks to US President Trump’s overnight Congressional address offering a less divisive and more optimistic outlook to his inauguration speech. While typically long on rhetoric, and perhaps lacking the policy detail markets craved, he offered just enough to keep bulls happy by reiterating pledges for $1 trillion infrastructure spend and $54bn defense boost.

Sentiment buoyed further by hawkish comment from the Fed’s Dudley talking up a March rate hike and thus sending USD higher and both GBP and EUR lower to boost optimism in the UK Index and DAX. Add to this solid China PMI Manufacturing and an Aussie GDP beat  and metals prices are higher despite dollar strength.

While US bourses closed in the red, Asia has turned more bullish overnight with Japan’s Nikkei outperforming thanks to a weaker Yen. Australia's ASX as the GDP beat sent AUD higher, offsetting USD strength and positive China data. A US API Oil inventory build is also hampering Energy. China higher after PMI data and boosted by USD strength.

UK Index sentiment may be boosted by Dollar strength driving GBP/USD to Feb lows to flatter those with international exposure. The likes of Wolseley and Ashtead may do well given their performance since Trump’s election on hopes of big infrastructure spend. Miners may even get a double-whammy boost from higher metals prices (despite stronger USD) derived from Trump’s $1 trillion infrastructure ‘plan’ (detail rather lacking), solid China PMI Manufacturing and Aussie GDP beat, as well as financial flattery from a weaker GBP.

The Dow Jones record closing streak finally came to an end yesterday as investors cautiously awaited Trump’s Congressional address. Retail stocks led the Dow lower by 0.1%, non-essential consumer producers weighed on the weaker S&P 500 (-0.2%), while the Nasdaq underperformed, down 0.6%.

Crude Oil prices are falling overnight having rallied on US industry data showing a smaller than expected inventory build over the past week. After falling below $56 yesterday, Brent crude is testing 3-week rising support at $56.30 having fallen from overnight highs of $56.70, while US crude is back below $54, testing 2-week $53.80 support. The focus for crude investors will now be this afternoon’s official US government inventories data, released at 3:30pm, for any confirmation of the industry data.

Gold has sold off in reaction to Trump’s Congressional address and an increasingly hawkish US Federal Reserve for a test of its 2017 uptrend support at $1243. This comes as New York Federal Reserve head and noted dove William Dudley claimed that tightening policy is now ‘compelling’ which has seen the chance of a March rate hike raise above 80%, seeing investors flee the non-yielding safe haven asset.

In focus today will be a range of European Manufacturing PMI readings, while this afternoon, US Personal Income and Spending will likely be closely scrutinised by the US Federal Reserve as its speakers become more hawkish.

German Manufacturing PMI is seen improving, while its French equivalent pulls back, meaning the headline Eurozone reading will likely be unchanged. Also of note, German Unemployment is seen unchanged while its CPI reading (1pm) may break above the ECB’s 2% self-imposed inflation target for the first time since 2013.

Speakers of note today include the ECB’s Weidmann at 1:30pm (will he comment on rising German inflation?) while Fed speakers today include Kaplan (voter; centrist) and infamous voting dove Brainard. If we see the latter becoming increasingly hawkish, this would add to overnight comment from Dudley and send implied probability of a March Fed rate hike even higher before this evening’s Beige Book economic assessment.

For any help you may require placing trades or in terms of market information, put a call in to our trading floor – it’s all part of the service.

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

• Bunzl to acquire U.S-based Diversified Distribution Systems
• UK house prices accelerate, 2017 still seen sluggish – Nationwide
• BBA Aviation posts FY pretax loss from cont ops of $82.2m
• BBA Aviation says David Crook to succeed Mike Powell as group finance director
• Carillion full – year revenue rises
• ITV's production arm boosts earnings in tough ad market
• Russia's Evraz meets forecasts with 7% rise in 2016 core earnings
• Man Group assets rise 3% in 2016, profits by lower fees
• Man Group says Phillip Colebatch will step down as senior independent director
• Oil drops for second day; market awaits U.S. stocks data
• Royal Mail says will review Ofcom document
• Costain posts FY underlying PBT £37.5m
• Premier Foods names Daniel Wosner from Oasis Management as non – exec director
• CRH FY earnings top 3.1bn euros, cuts net debt sharply
• Bank of Cyprus posts FY pretax profit of 64m euros
• Gold falls on hawkish comments by Fed officials, dollar pressure