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

UK 100 Index called to open +120pts at 7100, with an overnight jump propelling the index to its best since mid-November. That said, while October falling highs resistance at 7130 was tested overnight it remains a hurdle. Bulls need a break above 7130. Bears require a breach of 7065 overnight lows. Watch levels: Bullish 7130, Bearish 7065

Calls for a robust open come after Asian bourses surged (China +2.5%) on optimism of a thawing in trade war concerns and a spike in oil prices. As we enter the final month of the year could the combination of a trade armistice and fresh bullishness towards Oil be just what traders need to help fuel another Santa Rally?

Presidents Trump and Xi have agreed to no new tariffs and a suspension of planned US tariff hikes from next year in exchange for China purchasing a “substantial” amount of US industrial and farm goods to narrow the US-China trade deficit.

China also agreed to “reduce and remove” 40% tariffs on US auto imports, although concrete details were conveniently scarce. Official trade talks will restart and last up 3 months. The trade war may not be over but it’s been delayed.

UK Index Miners may benefit from better than expected overnight Caixin Manufacturing PMI which improved to 50.2 vs 50.1 est./prev, better than Friday’s official reading  which fell back to a 2-year low of 50, on the cusp of contraction.

Oil prices surged more than 5%, with Brent Crude once again trading above $61, after Russia signalled that it was ready to continue cooperating with Saudi Arabia on potential production cuts. Qatar’s decision to exit OPEC over political disagreements with allies could sour some of the bullish sentiment, though Qatar is one of the smaller Gulf oil producers.

In corporate news today Shell has bowed to investor pressure, scheduling a 2020 shareholder vote on reducing carbon footprint, aiming for circa 20% cut by 2035, with 3-5yr targets linked to exec pay.

Oil majors may also react to higher oil prices (Russia to continue cooperating with Saudi Arabia) as well as Qatar deciding to leave OPEC from 1 Jan. UK Index Miners may benefit from improved sentiment on trade and better than expected overnight Caixin Manufacturing PMI.

Reuters suggests Vodafone’s acquisition of Liberty Global assets in Germany, Hungary, Romania and Czech Republic will face in-depth EU antitrust investigation. Rio Tinto says first shipment of bauxite leaves new Amrun mine six weeks early.

AstraZeneca completes divestment of European rights to Nexium for $700m and global rights (excl. US and Japan) to Vimovo for $115m. The FT reports UK Index Housebuilders and Countrywide signing up to list properties on new portal Rummage4Property, a new rival to Rightmove.

Babcock’s 50/50 JV with UGL wins new A$1.5bn ship maintenance contract with Australian Defence Force for up to 15 years (5 years initial + 2 extensions) commencing July 2019. Spirax-Sarco sells HygroMatik air humidification equipment business to Carel Industries for £52.3m.

Drax and Iberdrola amend earlier £702m Scottish Power takeover to mitigate risk that UK government will make smaller capacity payments. Agreed to compensate each other depending on Scottish Power’s gross profit, if government payments fall short. Takeda enters into $3.7bn loan agreement with JBIC to help part-finance its acquisition of Shire.

Unilever completes €3bn second tranche of €6bn return of proceeds from Spreads disposal. Coca Cola HBC announces share buyback and cancellation of 7.5m shares (max £225m) to offset dilution from stock options and employee incentive schemes.

RPC Group takeover offer deadline extended (again) to 21 December. Apollo private equity is only interested party left after Bain Capital walks away from negotiations. Stobart cuts Q4 dividend by 67% (1.5p vs 4.5p; full year dividend -9%) in order to invest in airport and energy operations.

In focus today will be further digestion of the impact of the weekend’s Trump-Xi meeting which has helped thaw trade war tensions between the world’s biggest economic powers.

Major macroeconomic data today is limited to final Manufacturing PMIs, where Europe (8:45-9am) should confirm across-the-board slowing (Italy outright contraction), the UK (9:45am) strengthening and the US (2:45pm) pulling back slightly. With the exception of Italy, all major Western economies are expected to still show manufacturing sector growth.

In terms of speakers, we have PM Theresa May (2pm) briefing the House of Commons on the results of her G20 trip to Argentina although there is likely to be more interest on the contentious issue of the government refusing to publish the full legal advice it has received on Brexit.

Several central bankers also speak today, including the Fed’s Quarles (1pm), discussing the economic outlook, inflation and monetary policy in a moderated Q&A. The Fed’s Williams (2:15pm) and Brainard (3:30pm) make remarks at an Evolving Structure of the US Treasury Market conference. The Fed’s Kaplan (6pm) participates in a community forum Q&A.

Closer to home, Bank of England Chief Economist Andy Haldane (5:30pm) speaks on public policy. In Brussels, the Eurogroup’s EcoFin will discuss eurozone integration, budget, new bailout fund and a deposit guarantee scheme, with ECB President Draghi and colleague Cœuré participating.

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