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

UK 100 Index called to open +65pts at 7365, after futures opened sharply higher overnight having found support at 7280, recovering from Friday’s lows. Bulls will want to see the rally continue to take the index back above 7400, while Bears seek a return to retest Friday’s lows just below 7300. Watch levels: Bullish 7380, Bearish 7340.

Calls for a sharply higher open come as the US Senate passed a key tax reform bill by 51-49 votes, paving the way for the first major overhaul of the US tax system since the Reagan administration. While the Senate bill will have to be aligned with the lower house’s equivalent bill, this marks a key legislative victory for President Trump who has seen his efforts to repeal and replace Obamacare fail while struggling to maintain a ban on the entry of some foreign nationals.

The passage of the bill has seen the US dollar rally against both Pound Sterling and the Euro, a trend that will aid the plethora of foreign earning stocks on the UK 100 . This is largely offsetting a Crude Oil sell-off as both Brent and US crude retreat from Friday’s post-OPEC/non-OPEC production cut extension, and follows a predominantly higher Asian session overnight after recovering from an early Tech sector sell-off.

In corporate news, 21st Century Fox has restarted talks with Disney about the sale of a swathe of assets, including its stake in Sky. Rio Tinto appoints Simon Thompson as its new Chairman, using the release to point to lower capex for the year. Ryanair announces a November load factor of 96%, up 1% on the previous month.

US equity markets closed lower across the board on Friday after Trump’s former security adviser Michael Flynn pleaded guilty to lying to the FBI, however the late night passage of the Senate tax reform bill has seen Wall Street futures trade higher overnight.

Crude Oil prices have fallen from Friday’s OPEC/non-OPEC production cut extension as the stronger US dollar makes the price of both Brent and US crude comparatively more expensive in non-USD denominations. Gold suffers a similar fate, falling over $7 and break down from a supportive rising channel to trade close to last week’s 2-week lows.

In focus today will be all-important Brexit talks taking place in Brussels. UK PM May travels to meet with her EU counterpart Juncker for lunch hoping to strike a deal that would allow divorce negotiations to progress to the next phase on 14 December. However, while a preliminary deal has been struck on the divorce bill the UK will pay the EU to leave, removing one of the key hurdles to the progression of talks, the PM still needs to offer assurances on the Northern Irish border and rights for EU citizens in UK, attempting to sidestep the rule of the European Court of Justice.

Should Juncker judge that not enough progress has been made on these key areas, he may choose to stop talks progressing to the second phase. On the other hand, if May can show that the UK is ready and willing to make constructive moves on the aforementioned areas, then talks about a key trade deal - the UK’s primary area of concern - can begin.

Data-wise, UK Construction PMI (9:30am) is seen continuing its recovery from September’s 1-year lows, while Eurozone Producer Price Inflation (10am) is expected to retreat from a 4-month high in September. This afternoon, US Factory Orders (3pm) are seen turning negative for the first time since July, (-0.4% expected) however likely remain a distance from July’s lows of -3.3%.

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