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

UK 100 Index called to open +5pts at 7650, essentially trading flat since yesterday afternoon, but holding its rising channel since 7 December. Bulls want to see a bounce towards the channel ceiling, while bears need a breach of the floor. Watch levels: Bullish 7660, Bearish 7635

Calls for a positive open come in the wake of more record highs on Wall St (Nasdaq, S&P) powered by Tech which supported overnight trading in Asia (ex-Japan). UK Index hindered by USD weakness sending GBP to its highest since September, although Australia’s ASX offers a positive read-across for UK Index dual listed Miners, oil prices hold around their highs on geopolitics and a positive set of results from the UK's Next could boost the bluechip retail sector.

Corporate news: Next Christmas trading better than expected, upgrades FY18 guidance by 1.1%. Babcock International awarded further 5yr maintenance support services contract worth £115m for Australian Navy. FCA to probe timeliness of Carillion announcements Dec 2016 to July 2017. Ryanair: Dec traffic +3%; load factor +1pt to 95%; Wizz Air Dec traffic +20%, load +0.2pts to 87.5%.

Electrocomponents expects US tax overhaul to have little impact on FY18 tax rate (FY 19 lower) but generate non-cash exceptional tax credit on revaluation of deferred tax balances. Staffline sees 2017 revenues below target, results within market expectations. WANdisco wins $4.3m contract with unnamed financial services company.

US equity markets closed higher on the first trading day of 2018, with both the S&P 500 and Nasdaq closing at new all-time record highs. Tech lead both indices higher, helping the latter to outperform and climb 1.5%, while the Dow Jones lagged further behind, up 0.4%, as Walt Disney and Apple gains offset a loss for The Travellers. Note the Dow Transportation Average closed at a fresh all-time high, a key tenet of Dow Theory.

Crude Oil prices remain strong, however both Brent and West Texas benchmarks have retreated from yesterday’s multi-year highs as a stabilising US dollar and concerns that Iran may seek to increase Oil output, breaking with its OPEC obligations, in order to quell unrest. Brent has retreated to trade at intersecting rising support at $66.8, while US crude is holding above the key $60 a barrel mark.

Gold has retreated from overnight multi-month highs as the US dollar sell-off hits a hurdle. The falling greenback has aided the precious metal, which becomes comparatively cheaper as the dollar falls. However, with the US dollar basket consolidating around lows of 91.5, the asset has fallen back from overnight 3.5-month highs of $1321, although remains a distance above the key $1300 level at $1313.

In focus today will be German Unemployment (8.55am), forecast to show a drop in December but the rate to be unchanged. Thereafter, UK PMI Construction (9.30am) may see an easing of its 3-month rebound, echoing yesterday’s cooler PMI Manufacturing..

This afternoon, investors will be looking for US ISM New York (2:45pm) print to extend three consecutive months of acceleration, shortly before ISM Manufacturing (3pm), which is seen unchanged in December, halting a 3-month retreat from September’s 13-year high.

This evening sees publication of the December Fed FOMC minutes, providing us with the latest on voting member views and what we might expect for 2018 in terms of further policy normalisation (rate hikes, QE unwind). Fireworks likely absent until next month, however, when new Fed chair Powell takes his seat from Yellen, the latter chairing one last meeting at the end of this month.

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