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

UK 100 Index called to open flat at 7475, having held above yesterday’s 7460 lows but failed overnight to overcome the 7490 breakdown. This leaves the index sideways, however, the eventual break north or south has potential to deliver a move worth 50-80pts. Bulls need a break above 7490 highs while Bears need a breach of 7460 lows. Watch levels: Bullish 7490, Bearish 7460.

A flat opening call comes as investors digest a hawkish Fed update where it elected to keep calm and carry on, delivering another US interest rate hike as markets had priced, in spite of stateside data continuing to disappoint. It also suggested just one more hike this year and offered much detail (except start date of) on how it plans to deflate that QE-bloated $4.2tn balance sheet.

It’s been a down session for Asian bourses, with Australia’s ASX underperforming due to yesterday’s Oil price drop weighing on Energy (and Miners), the Aussie dollar rallying on very strong jobs data (albeit with lower inflation expectations) and financials reacting to a dovish hike - we are now to expect just three hike this year, not four and there is clearly no urgency to trim balance sheet. Japan’s Nikkei is suffering from weakness in Energy, Financials and another drop for Tech.

US equity markets were mixed on Wednesday following the Fed rate hike, with the Dow Jones outperforming other bourses to close at another all-time closing high. Weakness in Energy names saw the S&P 500 close lower, while continued Tech weakness weighed on the sector-heavy Nasdaq.

Crude Oil prices remain weak overnight after official US inventory figures showed an unexpected build in gasoline stocks, while crude oil inventories fell by less than expected. This resulted in a sharp sell-off from $48.50 (Brent) and $46 (US) to fresh 2017 lows and this has continued throughout the Asian session. Trading in tight channels, both benchmarks have fallen from a test of channel ceilings this morning.

Gold, having rallied on weak US CPI data yesterday, pared gains as the Federal Reserve raised interest rates and set out a course for trimming its bloated balance sheet. The non-yielding safe haven asset, held to hedge against rising rates, sold off to trade fresh June lows. Despite a minor $10 recovery overnight, the precious metal has fallen once more as the USD tests falling highs resistance.

In focus, following last night US Fed update, will be the latest on monetary policy from the Bank of England (12pm). While no changes are expected to headline policy, the accompanying statement will be closely watched, especially after Tuesday’s hotter than expected inflation prints and yesterday’s disturbingly weak Average Earnings/Wages figures, highlighting the squeeze on consumers.

Whilst there is no press conference today, Governor Carney nonetheless speaks tonight at 9pm alongside UK Chancellor Phillip Hammond at Mansion House. Might the BoE chief dare tread the fine line of independence and dare allude to domestic political uncertainty and Brexit as Hammond champions a softer divorce from the EU?

In terms of data, UK Retail Sales (9:30am) will be the pick of the bunch, with both May prints (incl. and ex. fuel) expected to drop negative after April’s strength, while the annual pace retreats from last month’s 2017 highs. Note both tend to follow an up-down trend from one month to the next.

This afternoon, US Import Price is seen softer, echoing yesterday’s CPI. The US Philly Fed (1:30pm) is seen falling back from May’s surprise while Empire Manufacturing rebounds. US Industrial & Manufacturing Production (2:15pm) are both expected to soften in May following April’s spike to 2-year highs, while the US NAHB Housing Market Index (3pm) is seen holding firm.

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

• H&M sales miss forecast after rough start to May
• PZ Cussons says FY performance has been in line with expectations
• Echo Energy says sold its legacy Egyptian business
• Safestore says half – year revenue up 15.7%
• UK power producer Drax changes payouts with boost to dividend
• Ferrexpo appoints Simon Lockett as independent director
• Genel Energy says Tawke field partners receives payment from KRG
• John Laing Environmental plans to raise up to £40m via placing programme
• Majestic Wine FY sales rise on strong U.S. performance
• Sky and Virgin Media join – up in targeted TV advertising
• UK's DFS Furniture warns on profit, blames dip in demand
• UBS set to name new investment bank head from Barclays – Times of India
• London copper slips to one week low after US rate rise
• Gold gains as stocks fall after report of Trump probe
• Oil prices struggle on doubts OPEC can rein in oversupply