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

UK 100 Index called to open +45pts at 6840, having extended mid-Jan gains yesterday to easily break above Nov/Dec highs 6775 and open up the possibility of challenging Sept/2014 highs 6905. Overnight resistance 6850 around the US close. Updated Watch levels: Bullish 6860, Bearish 6790.

The positive open stems from continued digestion of the ECB’s QE announcement yesterday which pleased markets and overnight China HSBC PMI Manufacturing registering a second month of contraction adding to calls for more stimulus. Note a stable oil price despite major sector news (US stocks soar, Saudi King’s death).

The ECB plans to expand its asset purchase programme (to include sovereign bonds) to €60bn/month to boost growth in the region and fight deflation. This exceeded market expectations in terms of size and duration and its structure seems to have appeased those worried about how losses would be apportioned. Not launched until March we note several ECB members against the launch (Germany of course).

US markets closed with sizeable gains after the ECB announcement offset any gloom from stagnant jobless claims, a plunge by the Kansas City Fed and a huge rise in US Oil inventories. The S&P500 erased its gains for the year with banks and transportation rallying on better than expected earnings reports. After the US close, Starbucks reported earnings in-line with expectations but full-year guidance was light.

Asian markets boosted by the ECB’s stimulus plan with Japan’s Nikkei supported by a weaker JPY and slight improvement in PMI Manufacturing growth. The Japanese finance minister praised the ECB for its action against deflation. Australia’s ASX also helped by China stimulus hopes (contraction could mean more stimulus, but improved reading could mean also pick-up) and stable oil price.

In focus today we have PMI updates for France, Germany and the Eurozone with hopes for growth to remain around prior levels. UK Retail Sales seen weak in December. BoE Governor Carney speaks at 10am.

The Chicago Fed Nat Activity Index is seen giving up ground while US PMI Manufacturing stays solid and US Existing Home Sales rebound. Q4 results out from Honeywell, McDonalds, Bank of New York-Mellon, General Electric and Kimberley-Clark.

Gold still testing five-month highs $1300, although unable to make progress due to the stronger USD (product of weaker EUR (11yr low vs USD) from ECB QE announcement, less pressure from petro-dollar selling, and prospect of a US rate rise) even if uncertainty remains rife (Greek election, global growth, Oil supply) supporting safehaven demand.

Oil holding around the middle of yesterday’s range with Brent around $49/barrel and US Light $47, albeit with volatility given concerns about a huge build in US inventories (much bigger than expected) and what the passing of Saudi Arabian King Abdullah means in terms of succession and stability in the nation and whether OPEC’s biggest producer might alter current stance on low oil prices and global supply glut.

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Key Overnight Macro Data: (Source: Reuters/DJ Newswires)

• Japan                    PMI Manufacturing                         Growth edged up
• China                     HSBC PMI Manufacturing             contraction Improved

See Live Macro Calendar for full data line-up, incl. consensus expectations

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

• First GSK Ebola vaccine shipment due to arrive in Liberia
• Tethys Petroleum says Kyzyloi contract extended for 15 years
• Carillion awarded two five – year contracts in British prison deal
• Close Brothers says remain confident in outlook for current financial year
• Ultra Electronics says Oman airport IT contract terminated
• Jimmy Choo says FY constant currency net revenue of about 299 mln stg
• Spectris completes acquisiton of U.S. – based ReliaSoft Corp
• Gulfsands says Arawak terminates strategic cooperation agreement
• Enquest says 2014 provisional production up 17 pct
• Retailer B&M says UK underlying sales up 4.5 pct in Xmas quarter