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

UK 100 Index called to open +15pts at 7710, back above 7700 after yesterday’s breakdown from a 3-week rising channel. However, it is struggling to overcome falling highs resistance from Monday’s peak. Bulls need a break above 7715 to overcome said resistance, Bears a breach of yesterday’s 7690 lows. Watch levels: Bullish 7715, Bearish 7690

Calls for a positive open derive from more record highs on Wall St (Nasdaq, S&P) and gains in Asia overnight (Japan back from holiday). Additional support stems from oil rising overnight on OPEC supply cut belief and Iran concerns. Base metals (copper) off their lows, and GBP off overnight highs versus USD and EUR, should benefit commodity sector. An Olympic thawing on the Korean peninsula is also welcome. German DAX supported by better than expected industrial production and import/export data.

The UK Retail sector - grocers in particular - are likely to get a boost from a very positive Xmas trading update from Morrisons that may result in a short squeeze like we saw with fashion group Next last week while Housebuilders should get support from Persimmon upping full year guidance.

Overnight, US equity markets were mixed as both the S&P 500 and the Nasdaq closed at fresh all-time highs, however the Dow Jones, having touched a fresh intraday record high, eventually finished lower to snap a four day win streak. The Nasdaq outperformed as the Tech sector continued recent strength, while Utilities led the S&P higher. Gains for Caterpillar were not enough to help the Dow to a fresh record close as Goldman Sachs and UnitedHealth weighed.

Crude Oil prices have moved higher overnight, with US crude touching a fresh 2.5 year high of $62.5. Reuters reports the latest jump to multi-year highs comes as speculative positions in oil increased with investors betting on the outcomes of OPEC/non-OPEC production cuts and the impact of US production. Brent Crude has also moved higher to $68.4, however remains just shy of last week’s $68.6 high.

Gold has continued to narrow between $1315-$1320 as the US dollar extends its rally from its lows to trade a 1.5 week high. The precious metal has continued consolidation between rising lows support and falling highs resistance as the dollar holds above yesterday’s breakout, maintaining a rising channel.

In focus today macro-data wise will be Eurozone Unemployment (10am), forecast to have fallen to 8.7% in November, taking it to a post-crisis record low and best since January 2009, adding to the region’s recovering growth picture even if inflation remains in the doldrums.

Thereafter US NFIB Small Business Optimism (11am) is being looked to for further improvement on November’s jump, to match the indicator’s July 1983 record of 108. US IBD/TIPP Economic Optimism (3pm) is also expected to improve marginally, getting back above 52 after Dec’s pullback.

The only central bank speaker on the roster today is the Fed’s dovish dissenter Kashkari (non-voter, 3pm), participating in a moderated Q&A at the headquarters of privately held corporate giant Cargill.

For positions sensitive to oil, US API Crude Stocks (9:30pm) could shift pricing overnight ahead of tomorrow’s official EIA data. Might we get a sixth API crude drawdown in a row of 5m or better?

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