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

UK 100 Index called to open -65pts at 6475, having fallen back from 6550 highs to re-test the lows and key 6450 breakout level from last week. Potential for 6450 to serve as support again thanks to narrowing pattern since mid-December (see yesterday’s Another level), however, falling highs from late December may be starting to weigh, pushing for a breakdown. Watch levels: Bullish 6565, Bearish 6440.

The negative open comes courtesy of US equities staging a big turnaround (the VIX volatility index surged) from positive US data-fuelled gains, optimism in the tech sector and an oil rebound, with negative catalysts ranging from a US Homebuilder warning on Q1 margins and speculation of German problems with QE.

Oil maintained its rebound until the US close before giving up gains on repeated OPEC stubbornness and forecasts of US inventory gains today along with the World Bank cutting global growth estimate resulting in a slump in commodity prices.

Also after the US close the World Bank cut 2015 global growth forecasts to 3.0% from 3.4% (although up from 2.6% last year) on lower prospects for Eurozone, Japan, Brazil and Russia, seeing the Fed hold off on rate hikes because of lower oil, stagnant US wages and slower global growth while the Fed’s Kocherlakota said he doesn’t favour raising rates in 2015.

Asian stocks in the red, with Japan’s Nikkei the standout underperformer hindered by Japan’s government drafting a record fiscal budget driving USD/JPY lower, and a cocktail of risk, uncertainty and renewed fear returning to markets mid-month. Australia’s ASX dented by on-going turmoil in commodities (Copper 5.5yr lows, Oil 6yr lows) affecting sentiment and a plunge in AUD/USD.

In focus this morning we have French Consumer Price Inflation seen recovering in December but slowing to stagnation over the past 12 months. This would add to German and Eurozone deflationary risks. The European Court of Justice (ECJ) gives its opinion on ECB Outright Monetary Transactions (OMT) which could narrow its options on QE. Eurozone Industrial Production is also forecast flat in December, and weak on the year.

In the afternoon, US Retail Sales expected weak in December (hurt by Black Friday success?), the BoE Governor Carney testifies to the Treasury Select Committee (TSC), with focus likely on low inflation after he said that even if inflation is weak BoE will still start to raise rates in the foreseeable future.

US Business Inventories are expected to have been a touch higher in November while a forecast rise in US Oil Inventories may add fuel to the fire of the commodity’s weakness on supply glut fears. The Fed’s Beige book assessment will be of interest after recent Fed minutes and rate hike/economic growth expectations.

Gold has given up around $10 from recent 12 week $1244 highs after yesterday’s equity market gains in Europe, still hindered by falling highs from late 2012 and the 200-day moving average it has not traded above for over 2 years. Some safehaven demand resumed on economic growth/industrial commodity rout fears.

Oil maintains its southerly course with yesterday’s pop higher quickly erased with brokers turning ever negative in terms of short-term forecasts ($40, $35/barrel), OPEC standing its ground on production and worries over rising US stockpiles. Much work to do before the downtrend is overcome. A re-run of the 80s?

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UK Company Headlines: (Source: Reuters/DJ Newswires)

• Ocado maintains sales growth in December
• Burberry says sales fell in Hong Kong in late 2014
• ARMS provides update on Singapore arbitration award against Roeslani
• Premier Oil expects $300 mln impairment charge due to weak prices
• C&C warns profits to fall after cider sales tumble in late 2014
• Money manager Jupiter's AUM rises to 31.9 bln pounds
• Provident Financial sees 2014 results in line with market expectations
• Dechra Pharma says first – half trading in line with expectations
• Connect Group posts 1.5 pct decline in 19 – week revenue
• Builder Barratt says demand robust as forward sales up 17 pct
• Just Eat sees FY like – for – like orders jump by half
• Churchill Mining provides update on Indonesia arbitration
• Salamander Energy says intends to end Bualang sale and purchase agreement
• Shoe Zone upbeat after FY profit more than doubles
• Fenner implements cost reduction programmes, defers capital projects
• SuperGroup upbeat after Christmas sales surge
• Ocado says December sales up 14.8 pct
• Cineworld sees FY results at top end of market consensus