UK 100 Index called to open +45pts at 6825, in the midst of a bullish test of 2-week falling highs. Overnight support at 6800 (bullish flag?) bodes well for yesterday’s rally to continue towards mid-month highs of 6900, perhaps even Nov highs of 7000. Bulls need a meaningful break beyond 6820 to open the door for another leg higher. Bears require a breach of 6800 to cap the current rally and increase the chances of a retrace from 2-month falling resistance. Watch levels: Bullish 6830, Bearish 6790.

Calls for further Equity gains in Europe come courtesy of another record Wall St close helped by a bank-led rally and even stronger advances in Asia overnight. This is in spite of lower oil prices and disappointing Aussie GDP, with metals prices back pointing north in spite of a stronger US dollar, something which should help the UK Index via a weaker GBP and DAX via weaker EUR.

Optimism remains rife within financials that the ECB is set to extend its bond-buying QE programme tomorrow and that a recapitalisation solution for troubled Italian bank Monte dei Paschi di Siena (MPS) is in the pipeline. However, this could be via Italy applying for a €15bn loan from Europe’s ESM to help recapitalise several troubled banks, not just MPS, which would avoid the issue of illegal state aid/bailout.

Note Australia’s ASX outperforming overnight despite poor GDP (government spending linked aberration?), with financials outperforming, while Japan’s Nikkei is fuelled by a weaker Yen and a $50bn 4-yr US investment pledge from Softbank to US President elect Donald Trump.

Once again, the Dow Jones closed at a record high, the 11th time it has done so since Trump’s election, however the index closed just 0.2% higher as the President-elect’s tweeting habits continue to influence markets, this time taking aim at Dow constituent Boeing. A 1.5% rally from the Telecom sector helped see the S&P 500 gain 0.3% despite Energy names weighing, whilst the Nasdaq finished the day trading almost 0.5% higher.

Crude Oil prices are once again trading slightly weaker as concerns arise over the potential for an increase in US oil production to bridge the gap left by OPEC after last week’s production cut, which itself is still in question before this weekend’s meeting with non-OPEC producers. This brings even more focus on today’s DOE EIA Crude Oil Inventories to discern whether this uptick could have already started. Could this be the start of the shale comeback?

Gold continues its downtrend started on Monday, breaking back below $1170, as Italian risk sentiment falls and the US Fed FOMC meeting edges closer. Investors are still coming around to pricing in a rate hike next week, despite Fed fund futures pointing to 100% certainty of an increase, while tomorrow’s ECB meeting will also be closely watched for any changes to its QE programme.

In focus today will be UK Halifax House Prices given the potential knock-on the data has on shares of UK Housebuilders. The gauge is seen showing a slowing in November, but accelerating on an annual basis over the last 3 months. Thereafter, October UK Industrial Production is seen rebounding but Manufacturing Production slowing, while the latest NIESR GDP estimate will be of interest especially in light of Brexit.

Keep an ear open also for further developments regarding Italy and its Banks rescue plan as well as further commentary from the UK Supreme Court Hearing on Article 50.

Stateside, listen out for US JOLTS Job Openings given the importance of jobs data on investor sentiment, although the print is unlikely to have any bearing on the Fed policy decision next week. US Crude Oil inventories have potential to add spice to the sector, especially after the post-OPEC rally and ahead of Saturday’s production-cut meeting between OPEC and Russia. Japanese GDP could move markets overnight.

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