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

UK 100 Index called to open flat at 7700, extending this week’s falling channel from record highs, following last night’s failure to break back above 7715. Bulls still need a break above this level to exit said down-channel. Bears are looking for a breach of 7688 - support which has held up overnight - in order to further the current trend. Watch levels: Bullish 7715, Bearish 7668

Calls for a flat start stem from persistent GBP strength - more to do with USD weakness as political stubbornness pushes the US government towards a shutdown, and rising bond yields (prices down, yields up), than any outright UK optimism - which continues to hinder UK Index blue-chips.

Some bearish talk on oil has also pulled barrel prices further from their recent highs while Miners were offside down under overnight despite a weak Dollar buoying metals. Note more disappointing UK retail sector updates this morning, including more profits warnings (see below), ahead of key December UK retail sales data later this morning (9.30am). Watch GBP.

Calls for a flattish start stem from persistent GBP strength - more to do with USD weakness with a looming government shutdown, and rising bond yields (prices down, yields up), than any outright UK optimism - continuing to hinder UK Index bluechips. Some bearish talk on oil has also pulled barrel prices further from their recent highs.

In UK corporate news this morning: AstraZeneca receives Japanese approval for respiratory drug Fasenra and ovarian cancer drug Lynparza. Aviva completes sale of Taiwan joint-venture First Aviva Life to partner. British Land appoints Simon Carter CFO, to succeed Lucinda Bell from April. Genel Energy announces significant (+27-78%) upgrade to estimates for Bina Bawi and Miran West fields gas resources.

esure CEO Stuart Vann stepping down with immediate effect. LT strategy best achieved with new leadership; CFO becomes interim CEO; FY gross written premiums +25%, in-force policies +9%, pre-tax profits +30%; started 2018 positively, trading in line. Dignity expects FY17 results in-line, but warns on FY18 due to continuing acceleration of price competition for funerals; customers increasingly price-conscious, industry over-supplied.

Bonmarche FY profit expectations remain unchanged; Q4 sales -5%, like-for-like stores -9.7%, online +28.5%, slight gross margin improvement vs Q3; FY sales +0.9%, LFL stores -2.8%, online +35.5%; uncertain outlook, especially weather, expects market to remain difficult.

Adding to retail sector woes Carpetright makes significant reduction top full-year expectations after deterioration in UK business, lower footfall, dampened consumer confidence; Xmas sales -2.3%, comparable flooring sales -7.1%; backed guidance for gross margin down 40-80bps.

US equity markets turned lower overnight as fears about a potential government shutdown weighed on investor sentiment. After a choppy session, the Dow Jones closed 0.3% lower as Boeing continued to drive the market, this time lower, while the S&P 500 also retreated despite a positive performance for Morgan Stanley post-results. The Tech-focused Nasdaq outperformed peers, closing just shy of breakeven.

Crude Oil benchmarks are trading lower overnight, extending a 1% sell-off from 3-year highs as concerns of weak demand and rising supply hurt bullishness. OPEC’s monthly oil report yesterday suggested producers outside of the bloc would increase output in the coming months, while global demand is set to slow. As a result, global benchmark Brent fell to a 10-day low of $68.5 overnight before finding support, while US crude briefly dipped below $63 before recovering to $63.1.

Gold has been the beneficiary of US government uncertainty, capitalising on a weaker dollar and safe haven seeking to challenge intersecting resistance at $1333. With the US dollar falling back towards 3-year lows amid heightened tensions, the Senate budget vote today will be the key market moving event, with a shutdown likely to induce fresh safe-haven demand.

In focus today will be UK Retail Sales (9.30am) which are forecast to show negative growth in December (-1.0%), in-line with existing seasonality after November was boosted by Black Friday and cold weather (+1.2%). That said, the pace of growth over the prior 12-months may pick up to its best since June (2.6% vs 1.5% in Nov). Any major deviation from consensus could impact inflation expectations and thus GBP, with a knock-on for the UK 100 .

Thereafter, it’s all about US Uni of Michigan Consumer Confidence (3pm) which is expected to pick up from a 3-month low showing improvements for all three sub-measures. Michigan Inflation expectations may also be of interest, given the Fed is still aiming to hike several times in 2018 (despite the dilemma of low inflation vs low unemployment) and markets continue to discuss rising bond yields and prospect of reversal of what has been a three decade rally for bonds.

The Fed’s Quarles (6pm) is the only speaker of note today, talking about bank regulation at the "American Bar Association - Banking Law Committee Annual Meeting" with an audience Q&A. Although Washington will also be under the spotlight ahead of a US Senate vote to avoid government shutdown.

There is also the possibility of S&P ratings updates on Germany, Spain and Greece while the likes of Schlumberger and Citizens Financial report results from across the pond.

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