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

UK 100 Index called to open flat at 7680, just shy of last week’s, and thus last year’s, record high of 7701. The year-end uptrend remains intact, within a 7600-7700 rising channel that could allow it build on an impressive 5.5% Santa Rally. Bulls need a break above 7700; bears are watchful of any test of intersecting support at 7665. Watch levels: Bullish 7700, Bearish 7665

Calls for a flat open are understandable as traders return to their desks from the Christmas break facing uncertainty from good old geopolitics (Iran, Korean peninsula) but with the added bonus of the long awaited new MIFID II financial regulations to add to the mix from tomorrow. That said, we have already had a positive start on the macro data front with better than expected China Caixin Manufacturing PMI (4-month high) and oil prices remain bid, both supportive of a large portion of the UK’s blue-chip index.

Corporate news: BP sees US earnings boost from tax change; will take $1.5bn one-off charge. Glencore agrees to sell Australian Tahoor coal mine to GFG Alliance. Marks & Spencer sells retail business in Hong Kong, Macau; Al-Futtaim becomes new sole franchisee. Compass Group CEO designate Dominic Blackmore takes up position 3-months early after death of Richard Cousins.

US equity markets closed lower on the final trading day of 2017, however held onto yearly gains, marking the best year for the S&P 500 since 2013. The Dow Jones retreated 0.5% as UnitedHealth and Apple lead losers, while Tech also lead the S&P sell-off. Unsurprisingly, the Tech-focused Nasdaq underperformed its peers.

Crude Oil prices have rallied to fresh two and a half year highs as political tensions in OPEC member Iran have boosted prices overnight, the best start for benchmarks in a new year since 2014. Global benchmark Brent has broken above $67.5 a barrel, while its US equivalent  trades above $60.50 for the first time since 2015.

Gold has rallied further above $1300 as the US dollar extends its sell-off into 2018, reaching its highest level since September. Furthermore, increased political tensions in the Iran after several days of deadly protests are more than offsetting a possible olive branch being extended across the North-South border in Korea.

In focus today - the first UK trading session of the New Year - will be a range of global Manufacturing PMI prints. China kicked things off positively overnight, so now we move on to mainland Europe where, Italian (8:45am), French (8:50am) and German (8:55am) readings are all seen improving in December, the latter two confirmed at their highest levels ever, allowing the Eurozone print (9am) make its own new record.

The UK (9:30am) is the lone country expected to report a slowing print, retreating from a 6-year highs, while this afternoon, the US reading (2:45pm) is seen improving to its best level since 2015.

Although no speakers are scheduled today, central bankers are expected to reappear from the Christmas woodworks ahead of monetary policy updates later this month, while 2018 will see geopolitics continue to have a central driving role in equity markets, with Brexit, the Trump administration in the US and European elections (Italy) all expected to move markets.

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