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

UK 100 Index called to open -20pts at 7315, having pulled back from falling highs resistance at 7350 to test 7310 for support again. While this extends the sell-off from last week’s 7397 record highs, the level has held up again overnight, which bodes well for bulls looking for a rebound. Bulls need a break above 7325, although upside could be hindered around 7340. Bears require a breach of 7310 if they want to see 7300 or lower. Watch levels: Bullish 7325, Bearish 7305.

Calls for another negative open come after more losses on Wall St and a mixed bag in Asia overnight. A sharp 5% drop in oil prices following more big US inventory builds has weighed heavily on Energy which don’t forget makes up over 13% of the UK’s UK Index index (BP, RDSb), before we even consider the read-across to support/engineering names and the sentiment hit to the Miners.

And while oil prices are off their worst levels, sentiment remains hindered even more intense head-scratching about China as overnight inflation prints (surge in producer prices, plunge in consumer prices) added to yesterday’s surprise trade deficit. This could revive concern about its economic transition from exporter to consumer (and its debt mountain, stimulus efforts) especially ahead of next week’s probable Fed rate hike (100% priced in).

Japan’s Nikkei is positive, outperforming thanks to Yen weakness as the dollar strengthens into next week’s likely Fed policy hike, and gains for IT and consumer offsetting a poor show for Energy. The resources heavy Australia’s ASX is suffering from the weakness in Energy offsetting gains for consumer discretionary, and some dual-listed Miners in the red by 2-5%.

UK Index sentiment may be impacted by the oil price move mentioned above as well as corporate results from the likes of Aviva (planning more capital returns; raises dividend), Old Mutual (profits -7%; dividend cut; restructuring progressing) and Morrisons (profits at upper end of consensus; achieved £1bn cost savings; net debt lower; dividend +9%).

US equity markets closed mostly lower for a third consecutive session as tumbling crude oil prices offset a much stronger than expected ADP jobs report (298K vs 190K). The Nasdaq outperformed, squeezing out a marginal 0.1% gain, while both the Dow Jones and S&P 500 suffering as Energy names weighed on both indices.

Crude Oil prices are recovering after falling to 4-month lows after European market close yesterday, breaking down from 3-month trading ranges, showing the first signs that investors are becoming concerned that record high US production levels could offset OPEC’s attempt to remove oversupply in the market. Having found overnight support (Brent $53, US $50) after a 5% slide, investors will be looking for any indication from OPEC officials that an extension to its production cut agreement may be in the offing.

Gold has continued its downtrend, as Fed rate hike expectations reach 100% and subsequently creating fresh US dollar strength, seeing investors shy away from the non-yielding safe haven asset. While currently holding at weak support at $1203, the precious metal is now trading at its lowest level since the beginning of February, with the next significant level of support at $1180 should a breakdown occur.

In focus today will be the ECB Monetary Policy update, Draghi and co likely standing pat yet again, with maybe even another copy and paste statement (third in a row?). All eyes thus on the press conference for any change to the central bank’s outlook, especially further QE tapering, in light of rising inflationary pressures (headline vs core), especially in Germany, although it could be argued that oil prices -5% YTD could mean this dissipates soon.

With Brexit and Article 50 so topical ahead of Dutch and French Elections, the meeting of EU leaders in Brussels could provide some interesting soundbites, Theresa May only welcome for day one as counterparts prepare for the upcoming EU 60th anniversary summit.

Data-wise, US Jobless Claims likely ticked up from last week’s 44yr low while Import Price inflation is expected cooler in Feb (0.1%. vs 0.4%  prev) but hotter annually (4.4% vs 3.7% prev).

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

• Domino's Pizza FY profit rises 17%; buys pizza chain in Norway
• Aviva posts strong FY operating profit (+12%), to give more cash back in 2017
• Shell brings changes to Directors remuneration policy
• Shell agrees $7.25bn Canadian oil sands sale
• Old Mutual profit up 1%, names new chairman for emerging markets business
• Gold edges down to five – week low ahead of U.S. jobs data
• Premier Oil says over half of convertible bondholders agree to new terms
• Premier Oil reports 2016 pre – tax loss of $390.6m
• Estate agency Countrywide 2016 profit slumps on property tax hike
• HSBC Holdings updates on sale of additional portfolio of US consumer mortgage loans
• Britain's Co–op bank posts annual loss of $580m
• Cineworld reports FY revenue of £797.8m pounds, up 13%
• JD Sports announces potential tie – up with Spain & Portugal's Sport Zone
• DS Smith says outlook remains positive
• UK's Morrisons reports first annual profit rise in five years
• Rio Tinto says Jan du Plessis to retire as chairman
• Spirax – Sarco posts FY pre – tax profit of £177.9m
• Britain's BT appoints Jan du Plessis as next chairman
• Hugo Boss sees sales stabilising in 2017 as China recovers
• London copper sinks to 7 – week low on dollar, Escondida talks