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

UK 100 Index called to open +40pts at 7205, having traded sideways through falling highs resistance at 7200 overnight. Not exactly a breakout, in which case Bulls will still be looking for a break above late Monday’s 7220 peak. Bears will need to see overnight lows of 7185 give way.  Watch levels: Bullish 7220, Bearish 7185

Calls for a positive start come after Asian bourses tried to follow Wall St higher amid a continued volatility retreat although Japan’s Nikkei remained under pressure amid Yen strength, a product of USD weakness ahead of key US inflation data today and persistent safe haven interest.

The Tech sector was lively again, recovering more of its lost ground, along with Financials, although Australia’s ASX is offside with gains for metals and Miners offset by Energy still under pressure as oil hovers near lows.

Corporate news this morning: Banks may like Credit Suisse’s upbeat outlook as it continues to restructure and markets pick up, even after a third FY loss and France’s Credit Agricole seeing Q4 profits jumper more than expected, despite a tax hit. BT and Sky retain live rights to Premier League football through 2022, paying 21% more and 16% less per game, respectively, than paid in 2015.

GKN steps up defense from Melrose hostile takeover with further details of new strategy and transformation plan including aim of returning £2.5bn to shareholders over 3yrs (much from divestments) and average dividend payout of 50% of free cash flow.  Coca-Cola HBC 2017 net profit +24% on improved sales and margins.

Galliford Try 1H pre-tax profit falls, seeking to raise £150m. Spirax-Sarco Chairman to Retire in May. Serco signs revised agreement to buy Carillion facilities contracts. Sirius Minerals signs shaft sinking contract with DMC. Botswana Diamonds raises £500K to fund exploration campaigns. Plus500 2017 profits rise, declares special dividend. HSS Hire reaches agreement with Unipart; backs 2017 guidance

US equity markets recovered from an early bout of weakness to close higher overnight ahead of today’s key inflation data, with the Tech-focused Nasdaq leading the way. Financials helped both the Dow Jones and S&P 500 climb higher, with Goldman Sachs leading the way for the former. The CPI print this afternoon will be closely watched after concerns about US inflationary pressures prompted the recent global market sell-off.

Gold has extended its recovery, climbing above $1330 as the US dollar continues yesterday’s weakness. With that said, however, the greenback is off its lows, which has seen the precious metal fall from overnight highs of $1337, although it remains in its breakout uptrend. US inflation and its implications for the US dollar will be key for Gold’s performance throughout today.

Crude Oil benchmarks have bounced from yesterday afternoon’s lows, however remain under pressure after overnight API US inventories data showed a surprise build in both crude and gasoline stocks. Brent crude trades around a $63 handle, off yesterday’s lows of $62, while US crude is under pressure at $59 from yesterday’s lows of $58.5.

In focus today, in the wake of a recent market sell-off driven by stronger than expected US Wage growth taken as an inflationary signal, will be official US Consumer Price Inflation (CPI; 1.30pm). January’s Headline and Core readings are expected to have cooled over the last 12 months, to 1.9% and 1.7% (from 2.1% and 1.8%, respectively), meaning any upside surprise could result in another bout of market jitters about whether the Fed, under new Chair Powell, will be forced to tighten monetary policy even more aggressively in order to hit its 2% price growth target.

That said, given the heated debate about this potentially being a post-crisis inflection point as inflation returns, detailed analysis of the Core measure may be required to adjust for the oil price rally, changes within Telecoms pricing and USD moves, if we are to extrapolate the underlying trend.

Elsewhere, Eurozone Q4 GDP (10am) is expected to show growth marginally softer than in Q3, extending both a monthly and yearly retreat from Q2’s 6-year high. This afternoon, headline US Retail Sales (1:30pm; alongside CPI) are seen falling to a 5-month low of 0.2%, extending a retreat from September’s 7-year highs, although the core print is expected to improve marginally, while US Business Inventories (3pm) are seen falling from a 3-month high in November.

US EIA Oil Inventories (3:30pm) will look to avoid a repeat of last night’s API figures that showed a surprise build in both Crude and Gasoline inventories. Like last week, however, production levels (highest in history as US Shale/Fracking rush to lock in higher prices resulting from OPEC-led production cuts) may steal the headlines.

Speakers today includes Eurozone hawk and Bundesbank Chief Weidmann (8am), while colleague Mersch (10:20am) discusses “Trends in cash transactions in the Eurosystem” before taking part on a joint panel with the Swiss National Bank’s Zurbruegg at 11:20am. This afternoon, comments from German Chancellor Merkel (3pm) will be closely watched amid the ongoing coalition talks with the SPD in Berlin, while we await UK Foreign Minister Johnson’s latest outline of his Brexit vision, promoting ‘hope not fear’ later today.

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