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

UK 100 Index called to open +25pts at 7245, with intersecting support at yesterday’s 7220 lows having been built on overnight to deliver a bounce of sorts. Whether this has legs remains to be seen (7250 yet to be cleared) but we note the 4-hourly chart already suggests RSI recovery from oversold and 7240 has proved supportive for the last 2-3 hours. Bulls need to see a break back above 7250 to rekindle optimism while Bears likely want to see 7240 give way for another test of 7220. Watch levels: Bullish 7255, Bearish 7235.

Calls for a positive open come thanks to a halt in yesterday’s damaging Sterling rally (GBP vs USD), one which dealt a 100pt blow to the internationally-exposed index, taking it from recent all-time highs. But not before a near 3% currency rally (biggest since Oct 2008) fuelled by the surprise concoction of hard Brexit clarity from PM May that fuelled short-covering, hawkish comments from BoE Governor Carney that refreshed bullish bets on GBP and President-elect Trump taking a surprisingly vocal dovish stance on the Dollar that sent the Greenback lower. A perfect Sterling storm for the UK Index .

A negative US return from the long weekend didn’t prevent a largely positive Asian session with a USD rebound from yesterday’s 5-week lows helping Japan’s Nikkei via a weaker Yen to boost exporters and Chinese equities higher. The stronger USD has kept a lid on already weak commodity prices, however, to hinder Australia’s ASX and push it into the red, although it is  Healthcare and Financials that are weighing most heavily.

US equity markets reopened yesterday after a long weekend, however suffered as Financial stocks underperformed based on concerns surrounding the implementation of Trump’s proposed deregulation plans. Goldman Sachs (reporting today) and JP Morgan dragged the Dow Jones 0.3% lower while the S&P also closed down 0.3% as its Financial sector fell by over 2%, including Morgan Stanley despite beating earnings expectations. Meanwhile the Nasdaq underperformed its peers, closing -0.6%.

Crude Oil prices have fallen since the reopening of US markets yesterday afternoon, however a run of rising lows support sees both Brent and US Crude safely above last week’s 3 month lows. Continuing OPEC production cuts alongside consensus that tomorrow’s official government inventory data will show a drawdown, providing some upside.

Gold’s rally has faltered slightly after yesterday’s speech from the UK PM abated market fears surrounding Brexit that has seen investors move away from safe haven assets. Alongside the Japanese Yen, gold is 0.5% lower overnight at $1211 having fallen from $1219fresh 8-week highs, hampered further by a stronger US Dollar bouncing from its lows during Asian trading hours. A strong US CPI print could provide a further setback for the precious metal given its implications for Fed rate policy.

In focus today will be two separate Consumer Price Inflation (CPI) readings, this morning from the Eurozone and this afternoon from the United States. The former is expected to confirm a 1.1% YoY figure for December, marking a strong rebound to its highest level since 2013, although potential for an upward surprise given other European inflation markers (France, Germany) producing strong bounces gives further weight to calls for the MoM figure to swing to 0.5% from -0.1%. The latter’s YoY reading is forecast to move above 2% for the first time since the second half of 2014, with any uptick to consensus likely to have a significant bearing on the Fed’s interest rate policy for 2017.

Elsewhere, UK Unemployment figures are released at 9:30am, with no change expected to the headline figure, however greater impetus may be placed on Average Weekly Earnings for any indication of increasing inflation, especially after yesterday’s CPI readings beat consensus across the board.

This afternoon, US Industrial and Manufacturing Production figures will be watched for signs of increased productivity in the run-up to Donald Trump’s presidency. Expectations for both to swing into positive territory would suggest this is the case.

Speakers of note today include the EU President Juncker at 10am, likely to give his opinion on yesterday’s Brexit speech from UK PM May, while the Fed’s Kaplan and Kashkari this afternoon could provide immediate reaction to those US inflation figures at 2pm and 4pm respectively before their boss Fed Chair Janet Yellen gives her thoughts at 8pm.

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

• Vodafone Extends Agreement with TDC in Denmark, Norway
• Burberry Posts Third-Quarter Revenue Growth, Sticks to Profit Outlook
• Pearson Withdrawing Operating Profit Goal for 2018
• Wetherspoon 2Q Comparable Sales Rise; Sees 1H Adj Oper Margin +1.7%
• Ladbrokes Coral Sees 2016 Oper Pft in Line Despite Poor Sporting Results
• Mitie FYH17 Underlying Operating Profit Seen Nearly Half FY16
• Diploma 1Q Revenue Up 23% Thanks to Weak British Pound
• Diageo - considering increasing its majority stake in United Spirits