Last night saw the latest rally in US equity markets run out of steam and briefly show signs that there could be some downside to come.

The major indices had been range trading until recently hitting a run of strong sentiment that has seen some aggressive gains. The rally had been criticised by many for having no substance and last nights move will only fuel the fire that a pullback is on the cards.

The European session again looks a little light of any key data, especially on the economic calendar. So we could well be looking to earnings yet again tomorrow to give us some direction. As the session moves on US durable goods orders will likely be a focus as will the oil inventory data. With a tropical storm heading for the Gulf of Mexico the oil spreads are likely to see some volatility.

It’s another busy day for results on Wednesday with FTSE stalwarts BG Group, BAT, Compass, Invensys, Rexam, Rolls-Royce, Sage and Centrica all fighting for attention.

Centrica, which trades under the British Gas and Scottish Gas brands, is expected to have benefited from a chilly winter in the UK. The residential business will have done well from what Citigroup called “a benign pricing environment”.

The broker is predicting operating profits from British Gas of £583m at the interim stage, up from £299m last year, while the business division is tipped to double profits to £132m.

Catering giant Compass Group will release sales details for the third quarter of its financial year. Nomura predicts third quarter organic revenue growth of +4.3% year on year (you) versus -1.7% in the first quarter and +2.5% in the second quarter.

Tobacco firm BAT should report an increase in interim pre-tax profits, with Charles Stanley pencilling in a figure of £2,460m, up from £2,176m in the first half of 2009. The broker is hoping for a boost to the dividend from 27.9p last year to 33.1p at the interim stage this time.

Ahead of the open we expect to the FTSE to open up 3 points at 5,369, the DAX up 7 at 6,214, and the CAC up 1 at 3,667.

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Article by James Hughes, Analyst, CMC Markets.

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