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

UK 100 Index called to open flat at 7455, back from yesterday’s test of June falling highs resistance at 7490, but still holding its uptrend and Tuesday’s 7430 breakout. Bulls require a break above 7460 if they are to see another challenge of 7490. Bears need a test of intersecting rising support at 7440 to jeopardize the uptrend. Watch levels: Bullish 7465, Bearish 7440.

Calls for a mixed European open (UK Index flat, DAX lower) comes as markets digest a more dovish than expected Fed policy update last night that sent USD lower, resulting in unwelcome GBP and EUR strength. The UK Index only outperforms thanks to the weaker USD buoying already solid copper and oil prices to help the major Miners and Oil majors.

The Fed did talk about starting to unwind its balance sheet ‘relatively soon’, which can be taken seen as hawkish, however, traders have focused on a subtle change to language about inflation suggesting Yellen and co. being less dismissive about soft data being ‘transitory’, potentially negating another rate hike this year. Markets are embracing the idea of cheaper money for longer.

UK Index corporate news includes Anglo American resuming dividend payments earlier than expected while St James’ Place raises its payments by 25%. Royal Dutch Shell profits have surged on higher oil prices, while AstraZeneca reported good results but also a cancer drug set-back.  Glencore Copper production fell in Q2.

Housebuilders may react to Foxtons’ warning of a challenging outlook and Countrywide’s profit collapse. Intu Properties has cut forecasts amid retail weakness that has seen sector shares fall markedly, but property hold up remarkably well.

Lloyds looks to have missed estimates after more chunky provisions, while RBS may be closer to a government sale and/or dividends after Europe agreed to its competition proposals to satisfy bailout rules. Note Deutsche Bank reported a surprise surge in profits despite lower fixed income trading as US peers reported.

Asian bourses have followed Wall St higher while emerging markets are seen continuing to benefit from lower borrowing costs. Japan’s Nikkei posts gains despite a stronger Yen as the tech sector (corporate results, investment) helps offset. Australia’s ASX is also higher despite a stronger Aussie dollar as commodities (esp Gold) are supported by the weaker US dollar.

US equity markets closed at record highs yesterday as the Fed provided a less hawkish than expected policy statement and impressive company earnings buoyed market sentiment. The Dow Jones outperformed as Boeing rallied almost 10% on impressive Q2 numbers, offsetting the combined losses of all 16 falling stocks. The Nasdaq also rallied, notching a second straight record high, while the S&P500 closed just above break even after Telecom strength offset Financial weakness.

US companies reporting today include Dow component Procter & Gamble, online retail colossus Amazon, Trump soapbox Twitter, coffee giant Starbucks and Telecoms giant  Verizon, amongst others. Note, Facebook traded higher in after-market hours following the announcement of a 71% profits surge while PayPal also topped estimates to trade almost 1% higher after hours.

Crude Oil benchmarks have consolidated positions above key price levels, as a bullish drawdown in official US inventories and a weekly decrease in US production aiding sentiment, however no further headway to fresh 2-month highs has been made. The US dollar will remain in focus for investors, with any further weakness likely to aid bullishness, while a rally from its 14-month lows could see week-long rising lows support tested.

Gold rallied sharply after the FOMC statement was interpreted as less hawkish than expected, while the US dollar falling to a fresh 14-month lows aids bullish sentiment further. The precious metal has rallied to a fresh 6-week high just shy of 1-year falling highs resistance at $1267 as investors turn to the non-yielding safe haven asset with expectations of one further rate hike this year at most.

Today’s calendar focus lies with this afternoon’s US Durable Goods Orders (1.30pm). The  headline measure is expected to show a solid June rebound, the fastest growth since Oct 2016 following two months of contraction. The less volatile Ex-Transport metric could see its growth re-attain the strongest growth levels of 2017, posted in Feb.

Closer to home, this morning’s UK CBI Retail data (11am), forecast to have given up a little ground in July, hinting at a still squeezed consumer as prices rise (weak GBP) while wages fail to keep up.

On a regional basis stateside, the Chicago Fed National Activity Index (3pm) is expected to bounce back to growth after May’s 2017 lows while Kansas City Fed Manufacturing (4pm) is seen unchanged in July, holding 3-month highs and its 7-month average.

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