UK 100 Index called to open +30pts at 7715, continuing the sideways ranging movement seen over the last few trading days. UK Index is off week’s lows, but is balanced on a knife’s edge between bullish and bearish sentiment. Bulls need a break above 7720 to escape the sideways movement. Bears require a break below 7690 to continue trading below falling highs resistance. Watch levels: Bullish 7720, Bearish 7678

Calls for a positive open are supported by recovery in Asia and in spite of earlier losses on Wall St where investors took a dim view to prospect of new trade wars as President Trump imposed punitive steel and aluminium tariffs on America’s three biggest trading partners. With EU, Canada and Mexico set to retaliate with protective measures of their own and US-China trade dispute still largely unresolved, the prospect of additional global trade tensions was spooking investors.

Markets were reassured when Italy stepped away from the precipice of fresh elections and the populist coalition proposed a new cabinet. While Eurosceptics will still dominate potential future Italian government of Giuseppe Conte, markets were considering this a preferable outcome to the alternative of fresh elections that would have been seen as a potential vote of confidence in the European system.

Nonetheless, European Union continued to come under pressure, as the Spanish opposition has secured enough votes to secure a motion of no-confidence in Spanish PM Rajoy. Opposition Socialist party, whose leader Pedro Sanchez is set to form a new Spanish government, is considered EU-friendly, but any prospect of political instability in a major EU member is seen by the markets as destabilising.

European financial sector is under pressure as S&P has downgraded Deutsche Bank to BBB+ (from A-) after US authorities put the investment bank's US division on the problem bank list, with potential read-across to UK Index Banks. Deutsche Bank and other major financial institutions are facing potential criminal cartel charges from US regulators.

Oil prices dipped slightly amid lack of clarity regarding OPEC’s intentions to ease voluntary supply cuts, but with yesterday’s EIA Oil Inventories posting a surprise crude draw of 3.62M barrels, oil is poised to recover some of the losses, with positive influence on major UK Index energy producers.

As the quarterly earnings season was drawing to a close, today is a relatively quiet day for corporate news. Rio Tinto has completed the sale of its Winchester South coal development project in Australia for a total of $200M in cash. Royal Dutch Shell announced production start at the Kaikias field in Gulf of Mexico, 12 months ahead of schedule. Ryanair CEO O'Leary sold €33M worth of stock in the airline on 30 May.

In focus today will be US Unemployment Rate and Non-Farm Payrolls (1:30pm), as well as a series of Manufacturing PMI figures, including Germany (8:55am), Eurozone (9am), the UK (9:30am) and, finally, the US (2:45pm), with indices expected to stay above the 50-point line that separates expansion from contraction in major Western economies.

Non-Farm Payrolls, an important barometer of economic activity in the United States, is expected to increase by 188K in a third straight month of employment growth. Markets will be looking closely at how much the actual employment data tallies with expectations as the previous April figures came well below analyst consensus.

Several Central Bankers will be speaking today, including Kaplan (1:30pm, centrist, non-voting), speaking in Dallas, and colleague Kashkari (1:55pm, dovish, non-voting), participating in a panel discussion on "Collaborative Strategies to Build Tomorrow's Workforce" in Minneapolis.

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