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

UK 100 Index called to open -35pts at 7345, having fallen to 1-month rising support overnight amid a natural pullback in global risk assets. A bullish double-bottom at 7325 overnight and a rally back above 7340 bodes well for bulls hoping this was merely a pullback amid the longer-term uptrend. Bears point to 2 and 3-month rising support at 7310 and 7250 and potential for another leg lower. Bulls need a break above 7350; Bears require another test of 7330. Watch levels: Bullish 7350, Bearish 7325

Calls for a negative open come after yesterday’s bout of global risk aversion extended overnight with US bourses suffering their worst session since Trump’s election victory in early November. Asian equities picked up the bearish baton to suggest a European start with safe-havens like Gold and Yen faring best while Financials have borne the brunt.

The driver for the sell-off is uncertainty about implementation of the US policies that have driven the optimism that fueled the Trump reflation trade, ushering markets to recent highs. After 2-months in office, markets want proof not just promises, fearful that the Healthcare reform Trump is using to put his stamp on the presidency could delay the tax cuts and infrastructure spending markets desire so much more.

Japan’s Nikkei underperforms on account of a stronger Yen hurting exporters. Australia’s ASX is hurting from aforementioned declines in Financials and the commodity space (ex-precious) after Oil took another leg lower on US inventory and global production concerns and the weak USD failed to buoy industrial metals prices.

US equity markets suffered their worst day since Donald Trump’s election as concerns about the pace of the President’s fiscal reform weighed on market sentiment. 109 days later, the S&P 500 finally broke its longest run of closes without a 1% fall since 1995, as Financials led all sectors (ex-Utilities) lower. It was the same story for the Dow Jones as Goldman Sachs, the post-Trump election darling, weighed on the index, while the Tech-heavy Nasdaq underperformed, down 1.8%.

Crude Oil prices have continued the sell-off that began yesterday afternoon, retreating to major support levels (Brent $50.50, US $47.80) overnight. API inventory data reported a 4.5m barrel build, in a reversal from last week’s drawdown, while reports that Libya is resuming its exports is adding further bearish sentiment to the market. Investors will now be closely watching this afternoon’s US government inventory data, with analysts expecting a 2.8m build, almost half the size of the API build.  

Gold has been the big beneficiary of the US and Asian market sell-off, rising to fresh 3-week highs as investors move away from risky assets into safe havens. This has been confirmed by falling treasury yields (another safe haven) overnight. Bulls will now be watching for a potential bullish pennant back to $1265 and fresh 2017 highs to be completed, with $1251 resistance marking a potential hurdle.

In focus today, with a conspicuous dearth of both macro data and notable speakers, will be US House Price data, US Existing Home Sales and weekly Oil inventories. The former is seen staying put at 0.4% in January after November’s 0.7% reading, Home Sales are seen cooling after January’s 10-year highs, while Oil inventories are expected to show a build once again after last week’s drawdown.

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

• Moody’s changes to positive outlook on Morrisons
• Britain’s IGas wins approval for shale gas exploration
• Savills beats profit expectations as UK business holds up despite Brexit
• Kingfisher beats forecasts for year profit, cautious on France
• Ferrexpo reports higher full – year core earnings
• Redrow says on track to deliver FY PBT of at least £306m
• Oil prices fall on bloated U.S. crude storage
• Mitsubishi says it may sell stakes in Australia thermal coal mines
• BHP Billiton, striking Escondida union to meet Wednesday
• Gold prices hold firm as equities slide on Trump policy worries