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

UK 100 called to open -30pts, with the index off its highs of yesterday (helped there by US jobs and Chicago PMI, and despite weaker GDP) following Chinese PMI Manufacturing data a touch weaker than expected, and while still growing (5^th consecutive month) the bears look to be focusing on the retreat to near breakeven and potential holes in recovery story, although bulls highlighting the New Year celebrations as traditionally distortive.

Asian markets mixed, with China a notable underperformer overnight after PMI but Japan’s posting of more deflationary data and sluggish demand has helped keep JPY weak (more stimulus expected), boosting Nikkei-listed equities. Global sentiment also tempered by looming US sequester (today is d-day), with and a deal between Democrats and Republicans looking unlikely and limited progress in the week following the messy Italian election.

In focus today, will be the deluge of European Manufacturing PMI data figures with little change expected from Flash/last month’s figures and only Germany and the UK brining good news. Note however the potential for surprises from big components France and Germany which could influence the Eurozone figure (still seen contracting).

Eurozone Inflation seen falling back a bit on an annual basis while Unemployment expected to tick up a notch. In the afternoon, US Personal Income and Spending seen bringing bad news with the former contracting almost as much as the prior month’s gain. Spending seen stable on last month.

The US PMI Manufacturing will be looked to for signs of continued growth with last month’s figure strong and well ahead of China or Europe. The Uni of Michigan Consumer Confidence expected to confirm preliminary reading while US Construction Spending expected to had grown less than December and ISM data showing slower growth in Manufacturing but better Prices Paid.

UK 100 tested falling 10-day resistance but failed at prior highs, with accommodative central bank stances continuing to override mixed macro data and political uncertainty. However, overnight data has put fears on China back in play and seen the index trade back down near yesterday’s lows. Potential for correction back to support at 6300 still possible, but bullish appetite means possibility of a 6400 visit equally as feasible.

In FX, GBP/USD trading sideways with support at 1.51, but remains off lows after dovish comments from the Fed’s Evans (need to maintain QE or lose escape velocity) and focus on today’s US government spending sequester putting the tepid US economic growth at risk, although Evans’ colleague Fisher repeated that it was time to taper off bond buying (QE) as the economy was improving thanks to existing stimulus. Note rising wedge pattern on MACD. EUR/USD back trading near recent lows of 1.30 after bearish engulfing candle yesterday. Reversal? Continued fight between weak macro data in Europe and US stimulus here to stay. Still in downtrend. Pause?

In Commodities, Gold back down below $1600 opening up possibility of what we highlighted yesterday, that recent bounce was bearish flag pattern and yellow metal still has downside potential to $1525. In Oils, US Light Crude broke below $92 support, maintaining February downtrend. Brent Crude followed suite, falling sub $111.5 (the average price for 2012). Both weak on mixed macro data.

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

• China               Manufacturing PMI                Worse, but still growth
• China               HSBC Manufacturing PMI       Worse, but still growth
• Japan               Vehicle Sales                           Still very weak, but less so
• UK                    Nationwide House Prices        Better
• Germany         Retail Sales                             Much Better
• See Live Macro calendar for all details

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

• William Hill buys out online partner Playtech
• Insurer Old Mutual says FY profit up 18 pct
• Taylor Wimpey makes board changes
• Lloyds posts £570m loss as mis-selling bill rises
• Lloyds takes further 1.9 bln stg mis-selling hit
• Lloyds awards CEO 1.5 bln stg share bonus
• Hammerson NAV p/share UP 2.3PCT TO £5.42
• BSKYB to buy Telefonica’s UK broadband business for 180 mln stg
• Stagecoach says UK strength offsets U.S. problems
• Rightmove FY profit jumps 26 pct, sees growth in 2013
• WPP annual growth ahead of expectations
• UBM says adjusted operating profit from cont ops up 1.6% to £177 mln in 2012