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

UK 100 Index called to open +30pts at 7275, but back from yet another test - and failure - to overcome falling highs resistance at 7295. Bulls need a break above this bugbear trendline (now at 7290) to inspire confidence in recovery; Bears require a breach of 7265 overnight lows. Watch levels: Bullish 7290, Bearish 7260

Calls for opening gains derive from a strong close for Wall St on Friday and a positive start to the week in Asia overnight. That said, a continued USD Index retreat from 90 has resulted in GBP strength which keeps a lid on a UK Index breakout, offsetting the benefit to commodities like copper and oil. Similar EUR strength, however, has failed to prevent the German DAX from holding its Friday breakout above its own recent falling highs resistance. China stocks un-phased, even welcoming, the prospect of a constitutional change that could end a two-term limit for presidency.

Corporate news this morning: AB Foods outlook unchanged, H1 sales growth for all business except sugar, adjusted operating profit flat; Primark like-for like sales -1% (UK +4%) after warm October, but record Christmas and encouraging early Spring/Summer, expects acceleration in H2. Bunzl FY revenues +16% (+10% at constant FX, 4.3% organic), adjusted EBIT/PBT +13% (+7% ex-FX), margins -20bps, dividend +10%.

Hammerson net rental income +6.9%, adjusted profits +6.8%, portfolio +5.9%, NAV +5%, div +6.5%. Melrose Industries gets favourable response from both US and Canadian anti-trust for proposed GKN acquisition. Vodafone & Samsung to launch smart home services. Hiscox pre-tax profits drop 91% in 2017 after historic year for catastrophe pay-out, gross premiums +6%, expenses +92%, dividend +2.6%.

US equity markets rallied sharply on Friday, closing the week higher having entered the session trading lower on the week, as bond yields retreated from 4-year highs. The Dow Jones climbed 1.4%, led higher by Goldman Sachs and Tech names Apple and United Technologies, while the S&P 500 rose 1.6% thanks to Utilities and Energy. The Tech-heavy Nasdaq outperformed, rallying 1.8% as ‘FANG’ stocks finished higher.

Gold has climbed sharply higher overnight as the US dollar retreats from falling highs resistance, extending its retreat from Thursday’s 10-day highs. The precious metal has enjoyed a double breakout from $1332 and $1336 resistance, climbing to an almost 1-week high of $1341 before retreating marginally to $1340 as the greenback bounces from session lows.  

Crude Oil benchmarks have continued to consolidate around fresh 3-week highs having rallied on Friday evening on bullish OPEC rhetoric and a marginally weaker USD. Brent crude is holding above $67 a barrel, although off highs of $67.7, while US crude has retreated from the $64 mark to trade around $63.7, although remains supported above $63.5

In focus this morning will be a speech by Labour leader Jeremy Corbyn in which the opposition leader is expected to announce commitment to a non-tariff agreement with the EU that would likely see the UK remain in the EU customs union, and avoid a ‘hard’ Brexit, whilst maintaining a strong relationship with the single market. This marks a substantial softening in his party’s position and is sure to be at odds with what PM Theresa May will say on Friday.

Data-wise, UK BBA Home Loans (9.30am) will be significant given the importance of the housing market for UK consumer confidence in light of pending interest rate rises, with consensus looking for a rebound from December’s weakest since Jan 2015.

This afternoon, both the Chicago (1.30pm) and Dallas Fed (3.30pm) updates for Jan and Feb, respectively, are forecast to post pull backs, the latter from its best since early 2006. US New Home Sales (3pm) for Jan should return to growth after December’s pullback/normalisation from a November spike.

Speakers today include the Fed’s Bullard (1pm; dove, non-voter) who presents on US Economy and Monetary Policy at the 34th Annual NABE Economic Policy Conference in Washington. GBP watchers note the Bank of England’s, and former British Representative to the EU, Cunliffe (6pm) delivering a speech entitled “What is Money?” at Warwick University’s PPE Society.

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