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

UK 100 Index called to open -25pts at 7350, back from an unsuccessful overnight challenge of 7380, to test 2-week falling highs resistance. Whilst this maintains the downtrend since 20 June, overnight declines have yet to test the uptrend from Friday’s lows. Bulls need a break above the 7355 highs of the last hour, Bears a break below 7340. Watch levels: Bullish 7355, Bearish 7340.

Calls for losses at the open derive from a largely negative session in Asia overnight following another mixed stateside session into the 4 July Independence day celebrations and more North Korean sabre rattling. Investors also continue to digest what is considered a more hawkish and coordinated central bank outlook, in spite of all the macro economic data ducks not quite being in a row.

Whilst the oil price rally (rebound extended to 12%; longest winning streak in 5 yrs) continues to benefit Energy, metals prices (especially copper and iron ore, and safe haven Gold) have turned back from their recent highs on account of a USD bounce. The latter may help buoy the UK Index and DAX by way of a weaker GBP and EUR, respectively.

Japan’s Nikkei is just under water, hindered by a firmer Yen, and despite the oil price rally. Australia’s ASX outperforms thanks to Energy and a strong performance by Financials before an RBA policy update that didn’t see it go more hawkish. Hong Kong (and China) underperform.

US equity markets finished a shortened trading session mixed on Monday as the Dow Jones notched a fresh record high while Tech suffered. Investor flight from large-cap Technology names into Financial and Energy names could signal the end of recent outperformance and contributed to a weaker close for the Nasdaq. Energy names led the S&P500 higher, while Goldman Sachs and JP Morgan helped the Dow to outperform.

Crude Oil prices have fallen from 3-week highs overnight, although remain in a strong position to extend their fortnight-long rally on account of multiple rising lows support levels. Overnight weakness can be attributed to the US dollar rallying from 9-month lows, which has so far seen benchmarks rally 12% from lows. Bulls hope for $49.70 (Brent) and $47.20 (US) overnight highs to be bettered for a rally to $50/$48.70 respectively, while bears eye risings lows support at $49/$46.50 to give way.

Gold has rallied from fresh 2-month lows overnight having broken down from key rising support yesterday afternoon. Investors have so far eyed the fresh weakness as an opportunity to bargain hunt, explaining the precious metal’s rally despite US dollar strength. However, having remained in a tight $1223-1227 rising channel overnight, bears may see a bearish flag pattern to $1200 and lower emerging.

After all the hawkish central bank excitement of last week, in focus today will be comments from the ECB’s Praet, Mersch and Nowotny. They will likely attract more attention than usual from investors hunting for clues about the trajectory of global monetary policy, especially tapering of the ECB’s QE programme. Will we get a Draghi-like message of cautious optimism, suggesting a QE taper is on the horizon? Or will it be a coordinated effort designed to rein in the market’s alleged hawkish over-reaction to the President's last outing?

With US markets closed for Independence Day celebrations, the data docket is light today. Top tier releases are limited to UK Construction PMI (9:30am), expected to retreat in June after posting an 18-month high in May, and Eurozone PPI (10am), seen turning negative in May while the annual figure falls to a 2017 low.

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

• UK's Hunting says U.S. shale boom helping business
• Sainsbury's sales beat forecasts, highlights tough market
• Costain sees reporting FY results in line with co's expectations
• Imagination Tech says no progress on Apple dispute, sale talks continue
• Sirius Real Estate updates on completion of acquisition of two properties
• Marshall Motor says during first five months of 2017 UK new car market declined
• Victoria Oil & Gas exercises option to extend termination date of Bowlevem agreement
• HSS Hire says Q2 EBITA growth in line with usual trading seasonality
• Wizz Air says June load factor 92.3%
• Aussie miners rise as iron ore jumps
• Lloyds was repeatedly warned of criminality at HBOS – FT
• Ryanair says June load factor up 2% on lower fares
• Gold nudges up, but pegged close to seven – week lows
• Oil prices fall ahead of U.S. holiday after 8 days of gains