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

UK 100 Index called to open +50pts at 7500 having recovered not just all ground lost yesterday but half of that lost the day before. After this test, Bulls are looking for a decisive break above 7500, and for this to hold as support to provide a platform for another leg higher. Bears will be looking for any any meaningful backtrack below 7500 to open the door for another leg lower. Watch levels: Bullish 7520, Bearish 7480.

A very positive opening call comes as UK Index investors embrace fresh GBP weakness following a hung parliament result from the UK election. Whilst this means uncertainty about the UK economy and of course Brexit negotiations, the index’s international exposure means it benefits from an FX translational standpoint. The prospect of a softer Brexit due to a coalition is also helping. Stocks in focus today will be Financials, Miners and Housebuilders.

Asian market moves may have little bearing on UK sentiment, although Japan’s Nikkei outperforms on Yen weakness. Mixed China inflation data (CPI accelerated, PPI slowed) may be what is holding back Australia's ASX (biggest trading partner) along with USD strength (June highs) weighing on the commodity space so watch London’s dual-listed Miners.

US bourses closed marginally higher on Thursday having retreated from session highs during ex-FBI chief Comey’s testimony. The Dow Jones traded a fresh all-time high during his appearance on Capitol Hill, however pared gains to close just above breakeven. The S&P500 followed a similar trend, with Financials leading the index less than one point higher, while the Nasdaq outperformed on account of its Tech-heavy make up as investors eye growth stocks.

Gold is lower overnight despite the emerging UK political uncertainty, falling as the US dollar trades a fresh June high. The precious metal is now trading at overnight lows and testing 1-month rising lows support around $1273. The ongoing political manoeuvring this morning will continue to hold influence this morning, through FX movements (weak Pound, stronger Dollar) and potential safe-haven demand.

With investor focus elsewhere, Crude Oil prices are little changed overnight, remaining under pressure following OPEC’s production cut agreement and recent political tensions between Qatar and major Gulf states. However, both Brent and US benchmarks have rallied from yesterday afternoon’s fresh 1-month lows (Brent $47.50), with the latter benefiting from rising lows support at $45.50. UK election-inspired FX movements could act as a driver as the US dollar reacts to Sterling.

In focus today will be the fallout from what has been an extraordinary UK general election result - a hung parliament. The Conservatives have lost their parliamentary majority amid strong gains for Labour. Prime Minister Theresa May will make a statement at 10am. Many are speculating that she will announce her resignation. Others believe she will carry on pledging to form a working coalition.

The result raises several question marks over the direction in which the UK is now headed, especially in terms of Brexit negotiations. The Conservative’s underperformance on a Hard Brexit mandate saw huge swings for Labour and the Lib Dems in staunchly ‘remain’ voting areas. Negotiations are scheduled to begin next Monday, 19 June, however, the EU Budget Commissioner Oettinger has already said, ‘No government, no negotiations.’ Further clarity from prominent EU figures like Tusk and Juncker will be valuable.

Data today, surely taking a back seat, is limited to UK Industrial and Manufacturing Production as well as Construction Output, all expected to have rebounded in April. This, along with the latest UK Trade Balance, could move GBP and UK Index . US Wholesale Sales and Inventories this afternoon are forecast mixed.

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