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

UK 100 called to open +10pts at 6345, having regained pre-Brexit (and 2016) highs amid an impressive 5-day recovery rally. After a close test of 6400 overnight, the index has traded around 6350. And despite weakening back since, could be in the midst of a bullish continuation triangle that sees the index maintain its northerly push. The Bulls will be watching for a break beyond overnight falling highs at 6375, while the Bears eye any venture close to 6300 for signs that it is has peaked and could be turning over. Watch levels: Bullish 6375, Bearish 6325.

A positive opening call, and most tepid since last Tuesday, comes after another session of gains in both the US and Asia. This in response to UK blue-chips having retraced Brexit losses and markets appearing to take a reassuring look through near-term fears (political, economic, financial) on the premise that central banks will remain in low rates-and-stimulus-mode to help keep risk assets bid, even if it is at the expense of fixed income and despite the GBP still in the doldrums. Note a weaker USD and accompanying gains in commodities – notably copper and oil – helping sentiment. 

Australia’s ASX is outperforming as Energy and Miners advance on aforementioned commodities gains and recovery by dual-listed UK natural resources and financials. Japan’s Nikkei is unable to keep up as the Yen remains close to highs on account of the easing in USD strength. China stocks flat.

US markets rallied hard yesterday amid diminished angst concerning the UK’s exit from the EU. The S&P 500 has had its best 2 days in four months, Dow Jones closed up 1.6% and the Nasdaq climbed 1.9%. Some degree of prudence might not be a bad idea in terms of trading the US indices today, after such a strong couple of days stemming from diminished rate hike expectations and bargain hunting, and with underlying medium-term global uncertainty still very much there.

Note the US arms of Deutsche Bank and Santander failed the latest round of Fed stress tests for the second and third year running respectively. This presumably has implications for their parents back home in Europe, as stress test resilience is a condition that needs to be met in order to be allowed to return capital to shareholders in the form of income and share buybacks.

Crude oil prices are well supported this morning after yesterday’s EIA data confirmed Tuesday’s API print with a 4m barrel drawdown in US inventories. While Brent looks quite solid above the crucial $50 level, note the US marker could correct to $49.2 or thereabouts before resuming its northerly march. Note also potential for a little downside in equity markets after a very strong couple of days in that space.

Gold is in trading a narrowing 2 day range as risk appetite improves. Note this could prove to be a very long, drawn out consolidation pattern ahead of more upside, with underlying uncertainty still dominant.  A bounce off $1315 could see the ceiling of falling highs revisited at $1325.

In focus today will be the fallout from the latest EU summit, the summary statement from which made it clear that if the UK wants to retain single market access it must respect ALL 4 pillars of EU free movement; goods, services, capital and, most importantly, people. With immigration being the driver for a UK Leave vote, this suggests we could be headed for an EEA-like agreement like Norway’s, but not for a few years yet.

In terms of data, French CPI is seen cooling in June, but getting off flat on an annual basis similar to what we saw from Germany yesterday. The Eurozone CPI figure is forecast to have climbed out of deflation in June but the Core reading stable, while Italy remains in deflation. German unemployment is seen flat and UK Q1 GDP confirmed up 0.4% on the quarter and up 2.0% over the year.

In the afternoon, consensus for US Chicago PMI is for an improvement of almost 2 points to above 50 along with flat Jobless Claims. The Bank of England (BoE) Governor Mark Carney also speaks just before the UK close, which is sure to garner plenty of attention should it contain plans for intervention. The Fed’s Bullard speaks this later evening. 

For any help you may require placing trades or in terms of market information, put a call in to our trading floor – it’s all part of the service.

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

• Oil falls on improving supply outlook, economic worries
• Stobart Group considers larger, more frequent dividends
• Oilfield services provider Wood Group reiterates FY guidance
• Costain Group says to deliver FY results in line with expectations
• Weir Group COO to step down from board on Sept 30
• Walker Crips FY pretax profit more than doubles
• Tullow cuts west Africa production outlook after Ghana field outage
• Atlas Mara says exec Gibbs to leave at end of June
• Mereo Biopharma’s drug gets EU orphan status for brittle bone disease
• UK’s 3i says no plans to sell or list shares in Dutch retailer Action
• Airbus, Safran formally complete space launch merger
• Outsourcing firm Serco says no change to its FY expectations
• Legal & General’s retirement business books £4b H1 sales
• Motoring group AA to sell Irish business to Carlyle fund
• WSP Global says 35p per share offer for Sweett Group is final
• London copper buoyed near 8-week top as dollar slips
• Rio Tinto transferred its 53.8% shareholding in Bougainville Copper
• Rio Tinto ends mining in Papua New Guinea