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

UK 100 called to open -5pts, despite a positive performance by equities in the US and Asia (hitting new multi-year highs; Nikkei >11,500 for first time since 2008) following better ZEW sentiment survey data in Europe, possibly due to UK flagship Index having regained recent and multi-year highs which may prove a hurdle.

The bullishness in Japan was despite a slightly firmer JPY as PM Abe retreated from his Monday idea that the BoJ could buy foreign bonds, and after the finance minister dismissed the idea yesterday, increasing speculation of a rift between the two ahead of the naming of a new BoJ governor, with the press saying the PM had ruled out the leading candidate Muto.

Overnight data saw Japan’s trade balance widen more than expected, but saw both imports and exports rise (the former more than the latter), suggesting more consumption. China’s FDI (Foreign direct investment) fell for the 8^th consecutive month. Aussie Wage costs were in-line, but growth slowed year-on year. Japanese all industry activity showed a better rebound than expected and German inflation data had CPI (Consumer Price inflation) bang in-line but PPI (Producer Price Index) rising higher, but both well below the ECB’s 2.0% inflation target.

Ratings agencies vocal overnight, with Moody’s saying China dodged hard landing and recovering well, but pace of reforms key in moving from reliance on investment and leverage. S&P raised its outlook for China’s residential property developers to stable. Moody’s also saying liquidity and funding challenges remain for Spain’s banking sector despite recent positive signals.

In focus today will be the UK employment data which is seen showing another drop in jobless claims, but less so than last month, however unemployment rates are forecast to remain unchanged. Wages growth likely to have slowed, reinforcing the consumer squeeze between wages and inflation. The BoE (Bank of England) latest MPC (Monetary Policy Committee) minutes are unlikely to show much new given the surprisingly lengthy statement which accompanied that latest rate decision and after last week’s quarterly inflation report.

In the afternoon, US Housing seen showing more solid starts and permits prints (920K expected for both), but growth slowing in starts after the very strong December (despite fiscal cliff fears). Note however the disappointing NAHB housing index number yesterday. To close the data day, European Consumer Confidence seen improving slightly although remaining negative as consumers weather forced austerity.

UK 100 rebounded to recent highs of 6385 after positive ZEW sentiment survey data allowed for a solid breach of the recent falling highs. Overnight, though, no further progress made. Can the index push on or is this the pause before a return to 6300? Could UK employment data be the catalyst? Or could it be the US housing data which provides the fillip for a breach of 6400?

In FX, GBP/USD remains on its southerly trend towards 2011-12 lows of 1.525. Could MPC minutes maintain weakness, or provide springboard for recovery? Momentum still low and declining. EUR/USD rebounded after pause at 1.335 to above 1.34, and broken above February trend of falling highs. Resistance 1.35.

In Commodities, Gold stuttering around $1600, hampered by stronger dollar itself a result of the and prospect of competitive devaluation of currencies to boost growth. This could still be just a pause before a second leg down to lows of $1550, competing bearish flagpole. Oil, US Light Crude rebounded to $97 and pause here could allow further gains to $98. Brent Crude looks to still be losing momentum after topping out around $118, and struggling to get above $117.5 yesterday.

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

• Aussie              Wage Costs Index                   In-line
• Japan               All Industry Activity Index       Better
• Germany         Consumer price inflation        In-line
• Germany         Producer Price Inflation          Better
• See Live Macro calendar for all details

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

• UK estate agent Countrywide launches IPO
• Elementis acquires U.S. additives firm
• Centaur Media sees trading in line
• Printing.com warns on profit
• Travis Perkins sees signs growth will return to markets
• Inchcape buys Australian luxury car group
• Weir makes 3 buys for 55 mln stg
• Galliford Try posts flat H1 profit, outlook positive
• Rexam full-year underlying pretax profit rises
• Insurer RSA cuts dividend
• Spectris full-year pretax profit up 12 pct