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

UK 100 Index called to open -10pts at 7720, back at the recent trendline of rising support. Bulls will be looking for another bounce to challenge not only falling highs resistance at 7740, but also 5-day horizontal highs at 7745. Bears need a breach of rising support at 7720 to open the door towards 7682 Jan lows. Watch levels: Bullish 7740, Bearish 7720.

Calls for a negative start come after a mixed US finish was echoed in Asia overnight, the global rally taking a breather. This stems from the US Dollar index breaking below 90 to extended its declines, sending GBP above $1.40 to remain a hindrance for the UK’s UK Index while EUR trades fresh 3yr highs of $1.23 to hamper Germany’s DAX and its army of exporters. Oil holds close to highs, supporting Energy, while metals like Copper are off yesterday’s worst, although Miners were offside down under overnight after sharp declines in London yesterday.

In major UK corporate news this morning: Antofagasta Q4 Copper production down but in line; Gold lower; Net cash costs higher (lower grades); 2018 copper production guidance unchanged, weighted towards H2; expects lower grades, costs flat. Sage: Q1 in-line  even with some revenue delays into Q2 and GBP headwind; reiterate FY guidance (organic revs +8%, 27.5% op margin).

WH Smith total sales flat YoY and LFL -1%; Travel +3% LFL, gross margin growing; High Street -5% LFL, in-line, but Books declined on lack of spoof humour and margins missed. Uncertainty in the broader economic environment but expect costs saving ahead.

Fresnillo FY silver production in-line with guidance, FY gold production beats, but fell due to lower reduction of gold inventories and lower grades. 2018 silver production seen up at least 14%, in-line with long term guidance; Gold down between 1 and 4%. Polymetal FY Gold production increase beats guidance (Silver down), reiterates 2018-19 production guidance, but 2017 costs and CAPEX seen higher.

US equity markets saw a mixed performance overnight, with both the S&P 500 and Nasdaq closing at record highs as Netflix shares climbed over 10%, while the Dow Jones closed just shy of breakeven after notching a fresh intraday high following a spate of Q4 figures from constituents. The online streaming service prompted Tech to outperform, while both Johnson & Johnson and Procter & Gamble weighed on the Dow, offsetting a positive performance from The Travelers.

Note, Dow components General Electric and United Technologies both report during US market hours later today.

Crude Oil benchmarks have retreated from resistance overnight, falling from 1-week highs after API reported a surprise build in US inventories, the first time in seven weeks that the measure has increased. Global benchmark Brent has fallen back below $70 after briefly breaking above the key level yesterday, while US crude trades just above $65.5 ahead of key EIA oil inventories later today.

Gold has extended yesterday’s breakout above $1338 resistance as the US dollar trades fresh 3-year lows, with the precious metal fast approaching 2018 highs of $1344. The greenback will remain a key driver of sentiment for traders of the yellow metal ahead of President Trump’s visit to the World Economic Forum in Davos on Friday.

In focus today will be the first full day of the World Economic Forum in Davos. The pick of today’s speakers include German Chancellor Merkel, French President Macron, Italian PM Gentiloni, Saudi Arabian Oil Minister al-Falih, the Fed’s Kaplan and Alibaba CEO Jack Ma. Once more, commentary from other major players in global economics on the army of media outlets in attendance in Switzerland  will also be closely watched.

The highlight of macro data today is UK Unemployment and Earnings figures (9:30am). While the headline Unemployment rate is seen unchanged, the emphasis will be placed on Earnings figures as consumers continue to feel the pinch of high inflation. While expectations are for the headline figure to remain at a 2017 high of 2.5%, any deviation from this figure will have an impact on GBP and, subsequently, the UK Index .

Elsewhere today, German and Eurozone Manufacturing and Services PMIs (8am and 9am, respectively) are all seen retreating, German Services from 2-year highs, Eurozone Services from 6-year highs while both Manufacturing prints pull back from record levels.

This afternoon, US FHFA House Price Index (2pm) are seen unchanged in November, US Manufacturing PMI retreats marginally as Services improve (both 2:45pm), US Existing Home Sales (3pm) are seen falling from their highest level in a decade and US Crude Oil Inventories (3:30pm) will look to avoid a repeat of last night’s surprise API build, an outcome that would end a 9-week streak of drawdowns.

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