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

UK 100 Index called to open +5pts at 7595, trying its best to get back above 7600 but still hindered by yesterday’s 7610 breakdown. Bulls need a break back above 7610 while bears require a breach of yesterday’s 7575 lows to extend the declines. Watch levels: Bullish 7610, Bearish 7575

Calls for a marginally positive start come after Asian equities tried shrugging off a sharply lower close on Wall Street, where US equities saw their largest single session decline in over a year on overvaluation concerns before big-tech results and healthcare sector worries. An uneventful State of the Union address from President Trump has also helped along with bond yields easing.

Largely in-line Chinese PMI figures have helped Asian equities quash the sell-off, while commodity prices are climbing amid fresh US dollar weakness (strong Yen hampering Japan’s Nikkei), offsetting weakness in energy after a surprise build was reported in US crude oil inventories.

Overnight Data: UK GFK Consumer Confidence was not as weak as expected; the Lloyds Business Barometer rose; UK BRC Shop Price Index was off its off lows, but still deflationary; China PMI Manufacturing missed forecasts, down for second month to an 8-month low while Non-Manufacturing beat expectations, up for third month and close to Sept 3yr high. German December Retail sales, however, were very disappointing

UK corporate news this morning: BP announces two new North Sea exploration discoveries. SSE reiterates expectations for FY17 EPS and dividend growth, cuts CAPEX by 6%. Capita issues profits warning; £700m rights issue; disposals planned, dividends suspended. Premier Oil awarded Andaman II Licence in Indonesia.

FlyBe Q3 revenues +8.5%, passengers +8.1%, rev per seat +13.3%, load factor up to 75.8%.  Wizz Air raises FY revenues and costs guidance, but leaves net profit range; Q3 revenues & passengers +24% passengers but costs +25% so pre-tax profits -56%; Enquest agrees to decommission BP’s Magnus field’s Thistle and Deverson for $30-50m. Auto Trader to continue rolling buy-back programme. Britvic Q1 revenues +3.3%, £30m charge for Norwich site closure. Dairy Crest FY outlook in line with expectations.

US equity markets fell once again on Tuesday, notching their sharpest back-to-back fall since the Brexit vote in June 2016 and largest one day decline since August. The Dow Jones leaked just over 360 points, or 1.4%, for its largest single day drop since May in percentage terms, led lower by UnitedHealth. The S&P 500 also fell over 1%, with Healthcare weighing after Amazon, Berkshire Hathaway and JP Morgan announced a new non-profit healthcare venture, while the Tech-focused Nasdaq dropped 0.9%.

Note, US companies reporting today include Dow components Boeing (12:30pm), Facebook (9pm) and Microsoft (9pm), as well as AT&T (after-market), eBay (9:15pm), Eli Lilly (11:25am), Metlife (after-market), Mondelez (9pm), Paypal (9pm), QUALCOMM (after-market) and United States Steel (after-market) all before the market open.

Crude Oil benchmarks once again declined overnight, falling after API reported a larger than expected build in US crude oil inventories. US crude was worst hit, having broken through support yesterday afternoon, briefly falling below $64 overnight before making a hesitant recovery, while Brent crude is challenging support at $68.6 having fallen below $69 yesterday. Official EIA inventories will either confirm or dispel the overnight API data, having done the latter last week.

Gold is testing resistance at $1345 after the US dollar fails to overcome resistance to better yesterday’s 1-week highs. The precious metal has subsequently rallied from its overnight lows to test intersecting resistance, although whether it will be able to overcome the key level to better yesterday’s highs will be dependent on the performance of the greenback.

In focus today will be the latest Fed monetary policy statement (7pm) from which no change to US interest rates is anticipated because; 1) the last hike was in Dec; 2) the Fed prefers to hike with a press conference to explain and update its views; 3) because volatility has crept back into markets, with bond yields now higher; and, 4) it is Janet Yellen’s last meeting as Chair before handing over a steady policy-normalising ship to Jay Powell in February.

Eurozone Consumer Price Inflation (10am) is forecast slower in January (1.3%  vs 1.4% prev.), its slowest since July (Germany disappointed yesterday), although the more significant Core metric (excl. food, energy, alcohol, and tobacco) may tick back up to 1%, albeit still below July’s 1.2% and a way off the ECB’s 2% target to be able to shift the single currency central bank’s sentiment on policy outlook, especially whilst the EUR is so strong.

Ahead of Friday’s Non-Farm payrolls report, ADP Employment (1.15pm) is expected to normalise, dropping from 250K in December to match November’s 185K, to keep the average just above 200K.

With inflation so important for US monetary policy outlook (core bumbling along just shy of Fed’s 2% target), US Q4 Employment Costs (1.30pm) are seen back at their 0.6% quarterly average. As for the Chicago PMI (2.45pm), we‘ve had two beats and two misses from peer reports in the last week while US Pending Home Sales (3pm) may pick up monthly, but show a slowing on an annual basis.

After last night’s API report saw a larger than expected inventories build, US EIA Oil inventories (3:30pm) will once again be looking to dispel the private sector print - as it did last week - in order to breathe fresh life into Crude Oil benchmarks.

The ECB’s Coeuré (9.50am) gives a speech at the European Financial Forum in Dublin.

For any help you may require placing trades or in terms of market information, put a call in to our trading floor – it’s all part of the service.