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

UK 100 Index called to open -10pts at 7635, having extended yesterday’s sell-off to flirt with levels last traded 2 Jan. Bulls need a break above 7655 to give encouragement about a bullish reversal. Bears require a breach of 7623 to fan hopes of further downside. Note bearish falling highs overnight.  Watch levels: Bullish 7655, Bearish 7623.

Calls for a negative start come after another mixed finish on Wall St and weakness in Asia. This is derived from the USD extending yesterday's declines (3yr lows, blame US Treasury secretary Mnuchin for saying a "weak was USD good for the US in short term" who may be forced to clarify today) against major currencies, resulting in yet more of the corresponding hindrance we saw for the UK UK Index and German DAX. Note commodities price like Oil and Gold benefiting, and thus Miners down-under. Some jitters ahead of major speakers in Davos (including Mnuchin himself) and ECB update this afternoon.

In major UK corporate news this morning: St James’ Place FY net fund inflows +40% to £9.5bn, assets under management +20% to £90.7bn. Diageo reiterates FY guidance. H1 Organic volumes 2% vs 1.9% est, net sales +4% vs 3.7% est, op profit excl 7% vs 4.8% est. But North America, Africa weak, Europe, LatAm and  Asia strong.

Sky H1 like-for-like sales +5% vs 5.9% est, EBITDA +10%, new customers 365K, +1.6%, dividend 13p vs 10p est; expect the consumer environment to remain challenging. Anglo American reports Q4 production +5%, despite removal of higher cost platinum and coal volumes which resulted in a decrease in copper. ASOS reports revenue growth at top end of target.

Great Portland Estates proposes return of £306 million to shareholders (94p per share/15%); in spite of macro-econ and political uncertainties, tenant interest remains healthy. KAZ Minerals FY copper production +80%, in-line with updated guidance, gold production at upper end of guidance.

US equity markets were once again mixed overnight, this time with the Dow Jones notching a fresh all-time record close, while both the S&P 500 and Nasdaq closed lower, a complete reversal of Tuesday’s session. Tech stocks underperformed, leading the Nasdaq to underperform, with the sector also proving a laggard on the S&P 500. The Dow closed higher, although off its best levels, as Goldman Sachs gains offset Apple losses. Note, Dow components 3M and Caterpillar (China barometer) both provide Q4 trading updates at 12:30pm today.

Crude Oil benchmarks have traded fresh 3-year highs overnight as a bullish US EIA inventories drawdown adds further fuel to bullish OPEC production cut speculation. While off highs as the US dollar tentatively moves off its lows, global benchmark Brent briefly climbed above $71 overnight for the first time since 2014, while US crude is trading above $66.

Gold is trading fresh 28-month highs as the precious metal’s breakout smashes through September highs of $1357. The fresh strength can be attributed to continued US dollar weakness, driven to fresh 3-year lows by comments about the greenback from US Treasury Secretary Mnuchin. Note Mnuchin will appear on CNBC at 10am this morning, where he is sure to be quizzed on his ‘weak dollar’ comments.

In focus today will be the ECB monetary policy update (12pm). No changes expected, not after this month’s QE taper (announced Oct, enacted Jan), but we’ve had hawkish comments from several ECB members lately which, along with USD weakness, has helped EUR rally to 3yr highs. In which case, the Draghi press conference (1.30pm) is sure to be as lively as usual. Will he have anything to say about USD weakness? Currency wars?

After Tuesday’s strong ZEW prints, expect German IFO Surveys (9am) to echo continued confidence and optimism, possibly helping the EUR build on recent gains as the clock ticks down to this afternoon’s ECB update.

Closer to home, UK BBA Home Loans (9.30am) may have picked up a touch in December, stemming a three-month decline, before UK CBI Retail trends data (11am) deliver a January pullback to echo a mixed picture for retail sector Christmas trading updates and high street woes.

This afternoon, US New Home Sales (3pm) probably fell in December, giving back some of last month’s spike to their highest since Oct 2007, while the US Leading Index (3pm) and Kansas City Fed Manufacturing Index (4pm) both inch higher.

Day three of the World Economic Forum in Davos sees EU president Juncker (11am) giving a special address, at the same time as UK Chancellor Hammond, US Treasury Secretary Mnuchin and IMF Managing Director Lagarde’s panel discussion: “The Remaking of Global Finance”.

UK PM May (2pm) gives her own special address, although Politico reports that this risks being a sideshow, scheduled to overlap with an informal meeting of “world economic leaders”. This evening, the Dutch, Irish and Portuguese PMs and EU Trade Commissioner (6pm; Rutte, Varkadar, Santos da Costa, Malmström) feature in a panel discussion: “New Momentum for Europe”.

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