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

UK 100 called to open -10pts, despite better Chinese Business Sentiment (Jan flash growth reading upgraded) and negative Japanese consumer inflation (-0.1%) reinforcing need for even more aggressive stimulus by BoJ, given how far away the 2% inflation target is.

The JPY has fallen back again against USD, seeing the Nikkei post strong performance, exporters benefiting from weaker currency, while Kyoda news network suggests PM Abe still looking at possible law to force BoJ to keep easing policy. Minutes from the BoJ latest meeting showed some calling for lower short-term interest rates to help weaken the JPY further, likely fueling even more talk of currency wars.

Note, however, in Asia weak profits reports from South Korean autos and Samsung Electronics’ shares dropping after the company announced cautious spending plans, something which has added to the exiting fears and negative sentiment from Apple’s reporting of slowing growth and disappointing guidance. Neighbour North Korea continues its ‘threats’, not just against the US but also against the South if it supports UN sanctions.

US markets closed mixed (Nasdaq excluded, given impact of fall in Apple share price in reaction to earnings), initially helped by calming in fiscal worries and better macro data improving the global backdrop and thus demand for risk assets (equities, commodities), however, they pulled back near the close.

In focus today will be the German IFO Surveys which are seen improving slightly on last month and reinforcing the improvement in PMI data yesterday and recent strong figures from ZEW surveys, although the expectations element is still seen below 100.

Davos continues with extensive media coverage and commentary, while we also have ECB president Draghi and IMF chief Lagarde slated to speak this morning.

Of potentially significant interest this morning will also be which banks return (and how much) of what they borrowed cheaply (LTRO) from the ECB last year, with the early repayment window opening today. Sentiment towards institutions vary with those not paying back seen as weak (need to keep, can’t borrow cheaper elsewhere) and those who do deemed stronger (show of strength).

Thereafter, UK GDP is widely forecast to have gone negative (-0.1%) in Q4 putting it on track for a potential triple-dip recession with a difficult comedown from the strong Q3 (0.9%) which was helped by the summer of sport. The key Services sector is also seen contracting. Watch GBP.

US New Home Sales (consumer confidence indicator) seen rising in December after a decent November, continuing the good run of positive US housing data. The afternoon also sees Q4 results from some big US names and barometers of economic growth including P&G, Honeywell, Halliburton and Kimberly Clark.

UK 100 futures off their best levels of 6273 yesterday however, support at 6240 since the pullback into the US close. While a correction wouldn’t be anything out of the ordinary, sentiment remains positive and demand for risk appetite buoyed by positive macro data and despite some disappointing US earnings reports. Central banks still pumping out the money giving a floor to risk.

In FX, GBP/USD broken below key 1.58 level which opens up possibility of fall back to long term rising support at 1.57, helped by stronger US data strengthening USD and GBP suffering from prospect of negative Q4 GDP this morning/EU referendum call and AAA rating loss potential. EUR/USD broken up above falling highs and out of 1.325-1.34 range of late as Eurozone macro data (PMI) surprised to the upside.  GBP/EUR continues its 6-month demise falling back to Feb 2012 lows of 1.77 helped by Eurozone macro data and UK woes. Support here, or correction all the way back to 4-year rising lows at 1.15?

In Commodities, Gold has continued its fall back from $1695 as the USD strengthens and found a modicum of support at $1665. In Oil, US Light Crude remains in its $95-97 range, while Brent Crude continues its uptrend to try $113.5 with rising support at $113.

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

• China               MNI Business Sentiment         Improved
• See Live Macro calendar for all details

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

• Charles Stanley Q3 revenue up 13.5 pct
• Xstrata says Las Bambas project on track for 2015 ramp up
• API Group says sales process ongoing
• Avocet Mining says Q4 gold output falls
• Strikes hit Anglo American output, copper ticks up