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

UK 100 Index called to open +15pts at 7495, having drifted from overnight highs of 7405 where intersecting resistance crossed, to keep the index under pressure. Bulls need a break above rising resistance at 7410 to rekindle optimism. Bears are looking for a breach of 7390 overnight support to trigger a pullback to yesterday’s 7360 lows. Watch levels: Bullish 7415, Bearish 7385.

Calls for a positive European open come in the wake of a mixed Wall St close and similar performance in Asia overnight. The US Nasdaq index did, however, deliver yet another record closing high, with Tech in favour as markets drift towards tomorrow’s Fed update and higher oil prices keep sentiment buoyed.

Australia’s ASX outperforms easily thanks to a financials rebound and Energy embracing higher oil prices on the back of Saudi/Russian threats to those not complying with production cuts. Fresh USD weakness (lowest since summer 2016) ahead of tomorrow’s Fed meeting (exacerbated by White house uncertainty) is also helping commodities, especially Copper (fresh 5-month highs).

Japanese stocks are hindered by a weak USD and thus strong Yen (safe haven gold also benefiting), hampering exporters and industrials. Chinese stocks underperform, reversing yesterday’s outperformance.

Tomorrow’s Fed update is unlikely to deliver anything meaningful in terms of policy change (hence weak USD). However, it may provide some clarity on the outlook for further rate hikes in light of recent poor inflation data. Investors are eager to know more about the timing of its balance sheet unwind, however, Yellen may again only offer crumbs with which we can ponder over the rest of the summer.

Note, Google parent Alphabet’s shares fell 3% in after-market trading as EU’s record fine of $2.7bn weighed on its Q2 earnings report. US companies reporting later today include Dow components 3M, Caterpillar, DuPont, McDonald’s and United Technologies.  

US equity markets closed mixed yesterday as earnings season reaches its crescendo. The tech-focused Nasdaq closed at a fresh record high with investors eying results from giants Facebook and Amazon this week. However, the S&P500 and Dow Jones both closed lower as Utilities weighed on the former, while Johnson & Johnson and Goldman Sachs lead the latter to underperform.

Crude Oil has extended gains after the conclusion of yesterday’s OPEC and non-OPEC producers’ meeting in which de facto leaders Saudi Arabia and Russia promised harsher penalties for non-compliance, the former pledged to lower exports and Nigeria agreed to limit production once it reached 1.8m bpd. Fresh US dollar weakness has also helped global benchmark Brent break above $48.75 for the first time since Friday, while US crude trades above $46.50.

Gold is approaching intersecting resistance at late June highs of $1259 having briefly traded at the key level yesterday afternoon. Having rallied from lows of $1205 in early July, the precious metal pared yesterday’s gains to trade at $1252 overnight. However, fresh US dollar weakness this morning has lifted the asset’s price back above $1256 for a second challenge of $1259.

In focus today will be German IFO Surveys (9am), forecast to have edged back in July to buck a 5-month up trend. UK CBI Trends (11am) are also seen lower, Optimism back to flat and Orders giving up ground on last month’s 29-year best.

In the afternoon, US House Prices (2pm) are expected to have been resilient in May before Consumer Confidence (3pm) pulls back a touch but the Richmond Fed holds firm after last month’s rebound.

Note Bank of England Chief Economist Haldane – he who teased Sterling bulls by saying he was close to turning hawkish, then back tracked – speaks after the European close (6pm).

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