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

UK 100 Index called to open flat at 7250, with overnight resistance at 7260 keeping a lid on yesterday’s bounce from 7220 support. This rekindles the trend of falling highs from Monday’s record 7365 peak which could usher the index back for another test of 7220 which, if breached, could extend this week’s correction to below 7200. This sideways range could be a bearish flag pattern. Bulls need to see a breakout to 7270 to kill off the downtrend. Bears need to see 7220 support give way. Watch levels: Bullish 7265, Bearish 7235.

Calls for a flat open come after a mixed US finish and in spite of a largely positive Asian session where benefit was derived from local currency weakness fuelled by hawkish comments from Fed Chair Yellen (“three rate hikes this year”) that sent the USD higher, offsetting Trump’s “Dollar too strong”. This is not, however, benefiting the UK Index with GBP surprisingly firm overnight. Keep an eye on housebuilders after the UK RICS House Price balance fell back from last month’s 7-month highs although British Land (BLND) had a positive Q3 driven by lettings and renewals.

Japan’s Nikkei is outperforming again thanks to weakness in the Japanese Yen boosting shares prices of exporters although Toshiba suffered another profits warning. Australia’s ASX is positive as Oil prices regain poise and a stronger USD fails to derail the commodity space (excl. precious), although gains are tempered by a stronger AUD after inflation expectations jumped, and jobs data disappointed. Hong Kong and China both in the red.

A mixed session overnight for US equity markets saw the Dow Jones fall further from 20k, while its peers finished in the green. Falling oil prices saw energy names comprising the lower end of markets , although this did not stop both the S&P 500 and the Nasdaq both finishing higher (+0.2% and +0.3% respectively) thanks to a mix of Financial strength and the continuation of an impressive earnings season that has seen companies topping expectations across the board.

Having fallen to one week lows overnight, Crude Oil prices are cautiously recovering as investors gear up for tonight’s US official government inventories data. After industry data yesterday showed a 5m barrel drawdown, significantly larger than the 300k draw expected, bargain hunting from investors has seen a steady recovery rally in Asia, while OPEC commentary will also continue to impact markets.

Gold price has fallen once again, this time falling below $1200 in reaction to Fed Chair Yellen’s hawkish comments made last night. The non-yielding safe haven asset reacts negatively to rising interest rates, something the central bank head hinted rate-setters could continue to do until 2019 in order to achieve a natural rate of around 3%. Subsequent USD strength is also hurting the precious metal.

In focus today will be our first major central bank of the year, as the European Central Bank (ECB) updates on monetary policy for the region’s single currency.

No change is expected to headline rates or its QE bond-buying stimulus programme (12.45pm). The latter remains in full swing after last month’s extension to Dec 2017, albeit with purchases at a slower pace from April. However, any hints about the path for QE would be welcome (1.30pm Draghi press conference), given the quasi-taper we saw last month especially in light of solid growth and confidence readings, although inflation remains worryingly weak and political risk rife, thus supporting an accommodative stance until at least year end.

he most significant data comes from the US today with Housing Starts and Building Permits seen holding firm in December, the same true for the last jobless claims print before Trump’s inauguration on Friday. The Philly Fed manufacturing Index may have pulled back from a 2yr high while US Oil Inventories could echo API data last night with a reversal of last week’s build and a bigger than expected drawdown.

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

• Royal Mail Trading in Line Despite Poor UK Trading
• British Land Signs 3Q Leases Ahead of Estimated Rental Value
• BHP Billiton, Vale, JV Reach Preliminary Agreement With Brazil Prosecutors on Dam breach
• Evraz 2016 Crude Steel Production, Steel Product Output Down
• Polymetal International Buys Indirect Interest in Prognoz Silver Deposit
• N. Brown Posts Higher 3Q Revenue; Margin Guidance Narrowed
• Moneysupermarket.com Sees 2016 Adjusted Operating Profit Up 8%
• Pets At Home's Merchandise Business Burdens 3Q17 Sales
• Halfords 3Q Like-for-Like Revenue Up; to Pay Special Dividend
• GlaxoSmithKline Global Pharmaceuticals President Abbas Hussain to Leave