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

UK 100 Index called to open flat at 5960, but still on a downtrend from Monday’s highs as momentum continues to wane after the mid-month 10% rally. While weakness has seen us fall back from 3-month falling highs 6000 and break below steep rising support 5970, we note likely support at 5900, keeping us sideways from 17 Feb and thus potentially consolidating before another push north towards 6100 to maintain the recovery uptrend. However, a proper sustained breakout at 6000 is still required. Watch levels at: Bullish 5960, Bearish 5940.

The flat opening call comes after a mixed Asian session and following a weak US close as global risk appetite slumped further following yet another decline in the price of oil to break below recent rising support as markets price in a host of negatives regarding OPEC disagreement, no production cuts and the likelihood that US Shale producers have become the defacto swing producers, ready to rush back as soon as the price of a barrel recovers to $40 and above..

Asian stocks down the most in a week with Commodities and Energy under particular pressure from a retrace in metals prices to hurt the Aussie ASX while continued Yen strength is adding to the woes of exporters on Japan’s Nikkei. Note Chinese stocks posting gains, reversing early losses, after a jump in Industrial and infrastructure stocks suggesting hopes of more government stimulus.

Stocks on Wall Street closed in negative territory after they tracked the oil price lower on destroyed hopes of crude production cuts. Fed chat included some from a guy called Kaplan, who argued that policy should be kept on hold for as long as it takes for inflation to reach the target level. A more hawkish Esther George said that data has not indicated a fundamental change in outlook since December, and that another rate hike should therefore be discussed at the next (March) meeting.

In focus today will be UK BBA Home Loans for clues on the strength of the UK Housing market as well as consumer borrowing ability. UK CBI Sales seen dropping in Feb. In the afternoon, US PMI Services seen inching higher but New Homes Sales doing the opposite while the big event of the day could be US Oil Inventories especially with OPEC squabbling and after US API stocks posted their biggest build since Jan 25th (+7.1m barrels) to exacerbate to the supply glut. LIsten out for Fed chat from Lacker and Kaplan.   

Things went from ‘bad’ with Iran saying Saudi/Russian plans to freeze output were ‘ridiculous,’ to ‘worse’ with Saudi saying there will be no production cuts full stop, for crude prices overnight, while talk of a March meeting between oil ministers failed to provide support for Brent and WTI. Both markers are still essentially sideways, but note that all current drivers are negative (not that they’ve really been anything but recently).

Gold has broken below 2-days of rising support as equity markets go a little more risk-on ahead of the open. Downside to rising support $1207 or thereabouts is possible if that trend continues, with little danger of a breach of $1200 unless something really, really good happens!

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