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

UK 100 Index called to open -55pts at 7225, back from another failed attempt to crack 7300, still under the cosh of falling highs from 29 Jan’s 7700 peak. Bulls still need a break above 7300 to escape the current sideways consolidation channel and engineer another recovery leg. Bears really need a breach of 7175 overnight lows to put paid to rising support for more downside.  Watch levels: Bullish 7250, Bearish 7200

Calls for a negative start derive from a weak close on Wall St followed by a mixed session in Asia overnight, as digestion of the recent sell-off and subsequent rebound continues, and calm relative calm returns most notably in bond markets. Weak oil prices are hampering Energy along with a stronger USD, the latter hurting commodities after the US Senate voted in favour of a 2yr US government funding agreement, and in spite of exceptionally strong China imports data linked to year-end stockpiling. Weaker GBP and EUR helping UK Index and DAX off overnight lows, but hurdles remain.

Corporate news this morning: TalkTalk to form a fibre company funded by £200m share placement, reduces dividend, ups net adds forecasts. Smith & Nephew posts modest improvement in results, expect further improvement in 2018. Compass North America excellent, Europe and Rest of World better than planned; Upgrades FY guidance. GlaxoSmithKline and Pfizer’s ViiV files patent infringement litigation against Gilead Sciences over triple combination HIV drug and Indivior files new US lawsuits for infringement of Suboxone.

Energy names like BP and Royal Dutch Shell are sure to react to lower oil prices. Tate and Lyle on track to meet FY guidance. Ashmore H1 profits hit by FX volatility, assets  under management +18%, dividend maintained. Bellway H1 revenues +14%, completions +6.2%, prices +7.8%, order book +16%. Qinetiq Q3 underlying trading as expected, maintains FY expectations. 

Based on what’s happening in Europe, UK Index Banks may like France’s Societe Generale posting a small Q4 profit vs expected loss and Germany’s Commerzbank considering reinstatement of dividends after Q4 beat expectations. UK Index Insurance may be sensitive to Zurich Financial’s less than expected drop in profits, $1bn share buyback and dividend increase.

US equity markets closed lower yesterday, with both the Dow Jones and S&P 500 once again enduring wild swings, with the former seeing its largest single session reversal since August 2015 while the latter saw its biggest reversal in two years. On the Dow, Boeing gains could not offset Tech weakness, a theme that also saw the S&P fall while understandably the Tech-heavy Nasdaq underperformed as FANG stocks all closed more than 1.8% lower.

Gold is trading at 4-week lows having broken down from the floor of its falling channel yesterday. Fresh US dollar strength coming after the US Senate reaches a two year budget agreement to avoid further US government shutdowns hampers sentiment for the precious metal, which remains stubbornly below support turned resistance at $1320.

Crude Oil prices have steadied overnight having fallen sharply to 2018 lows after the US EIA reported US production once again above 10m bpd, its highest level since the 1970s. Some support comes in the form of yet another outage at the North Sea Forties pipeline, helping Brent crude from $65.5 overnight lows, however the global benchmark remains below $66 while its US equivalent trades 1-month lows below $62.

In focus today will be the Bank of England’s “Super Thursday” (12pm: Monetary policy policy update, Minutes, Quarterly Inflation Report) and subsequent press conference from Governor Mark Carney (12:30pm onwards). No changes are expected to be made to policy, but there could be policy signals and implications for future meetings, impacting both Sterling and the UK Index . See our preview explaining these impacts.

Speakers today, apart from the BoE Governor Carney, include the ECB’s Mersch (10.30am) who gives lecture on Digital Currency in London. IN Frankfurt, the Fed’s Kaplan (9.50am) participates in a moderated Q&A while ECB Chief Economist Praet (10.45am) is on a panel titled “Global Monetary Policies – Similarities and divergences on the way to the new normal”.

This afternoon, the Fed’s Harker (1pm) speaks the National Association of College and University Business Officers “2018 Endowment and Debt Management Forum” in New York, with audience and media Q&A, before colleague Kashkari (2pm) participates in a moderated Q&A session in South Dakota, with audience Q&A.

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