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

UK 100 called to open +5pts with Asia performing better than the US which failed to make new highs for the first time in several days. This after Europe took a pause for breath and focus shifted from equities to FX, most notably after USD/JPY broke through the fabled 100 barrier, with speculation on QE3 tapering, China USD reserves and better US jobs data.

Japan’s Nikkei the outperformer helped by weaker JPY and better trade data. Australia less impressive with the RBA’s monthly report less dovish tone than expected, confounding things further after the cut early in the week which was followed by a stellar jobs report. AUD fell back towards parity on even more reduced expectations of another rate cut.

Overnight there was volatility with US equities falling and Treasuries gaining on speculation of a WSJ article about the Fed tapering QE earlier than expected. No article materialised but idea supported by Philly Fed president Plosser saying QE3 benefits limited and asset purchases should slow.

In Europe, markets were mixed with the UK only just above water despite better production data and GDP estimate, and no BoE policy change. After gains of late, pause for breath not out of the ordinary.

In focus today: the G7 meeting and Fed Chairman Bernanke speaking. The UK’s Trade Balance is expected to show a slight narrowing of the deficit. UK Construction Output is seen accelerating strongly in March, but remaining weak over the year.

UK 100 holding above 6600, just. Possibility of a pause and slight correction (support at 6550/6500) in the longer-term quest to regain pre-crisis highs as peers have done recently.

 In FX, GBP/USD fell back sharply from the May cap at 1.56 and broke support at 1.545. This after the USD strengthening for the reasons cited above. Potential for correction to persist. EUR/USD also weakened back from high of 1.32, to breach support of 1.305 with the USD strength overriding optimism (less fear) on the Eurozone.

 Gold suffered from the stronger USD, but remains in sideways $1440-1480 pause for breath range. Beware further USD strength hindering the yellow metal’s chances of breaking out from the channel, exacerbated by talk of Fed tapering and QE3 inefficacy meaning less need for inflation hedge, and general optimism on growth removing need for safehaven.

Oils less responsive to USD move which remain near 1-month highs. US Light Crude still hanging around $96. Brent Crude back up around $104. Moving more on global growth sentiment (tepid, but better than nothing) and supply issues rather than USD?

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Overnight Macro Data: (Source: Reuters/DJ Newswires)

• Japan               Current Account                      Mixed
• Japan               Trade Balance                         Better
• Japan               Eco Watcher Surveys              Mixed
• Germany         Trade Balance                         Better
• Germany         Current Account                      Better
• Germany         Exports                                    In-line
• Germany         Imports                                    Worse
• See Live Macro calendar for all details

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

• Derwent London sees strong demand for space, higher rents
• Catlin incurs no catastrophe losses in Q1
• TUI Travel sees full year profit rising 10 percent
• Lloyds Banking Group sells UK real estate loans for 325 mln stg
• T Clarke trading in line
• BT raises outlook on strong fourth quarter
• Cobham buys wireless comms firm
• Ocado encouraged by progress of business so far this year
• Morgan Advanced Materials sees modest revenue growth as 2013 progresses
• BBA Aviation says revenue grows 3 pct so far this year
• IAG first quarter losses grow to 278 mln euros
• Miner Ferrexpo costs rise in Q1
• Schroder Oriental to raise up to 100 mln stg
• Centamin says Egypt recommendations in Sukari case ‘not positive’