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

UK 100 called to open -100pts, with Asian stocks lower following the US Sell-off and risk-off trade as Eurozone concerns revived via Italy’s election results suggesting a potentially hung parliament (stalemate between upper and lower houses) and the electorate making it very clear that austerity and support for protected political positions is not high on its agenda. Italian index called -600 points, Dax -150, Cac -120 and Ibex -300. Who said contagion risk was dead?

After a period of relative stability, the theme of political risk (last seen amid the Greek election last year, with re-election process necessary) has been very much revived seeing a rush to safe havens as investors become fearful of an re-eruption of Eurozone crisis (note ironic activity of Mount Etna lately). Note the extreme moves in the Euro as single currency shunned vs USD, GBP and JPY, although some say with more ECB muscle behind the situation, things not as serious as a year ago.

Overnight macro data limited to just Japanese Small Business Confidence which posted an improvement. We’ve had some dovish commentary from the RBA’s Debelle, which has spooked has spooked the AUD, with the assistant governor saying policy able to counter stronger AUD by cutting cash interest rate and rates can still be cut further of the currency appreciates further. No currency manipulation? FX wars? That Moscow G20 summit was really worth it.

In Japan, the finance minister has said that Kuroda has already got the BoJ Governor job and volatile FX moves (such as flow out of EUR and into JPY on election risk) are undesirable but declined to comment on appropriate JPY level, taking heed of G20 summit. There were also pro-QE comments from the US on account of weak US labour market, with Lockhart saying exceptional policy still OK, with benefits outweighing risks/costs/side-effects.

In focus today will be UK CBI Trends data where expectations are seen edging down from last month. US Housing Price figures seen showing more growth suggesting solid consumer confidence, itself seen recovering more than 3 points in February. The Richmond Fed’s negative reading to rebound closer to breakeven, although note the bad Philadelphia Fed last Thursday. New Home Sales seen rebounding after weak pre-fiscal cliff December.

UK 100 finally delivering the more substantial correction that we had been looking for for so long and had pretty much given up on. The 3-month graph shows the support at 6220 which would provide a nice platform for recovery, but with political uncertainty having a habit of hanging around the recovery could be hampered and the situation could always escalate taking the correction back to 6150 (prior major breakout) before any recovery top the recent highs of 6400.

In FX, GBP/USD continues rebound as GBP benefits from preference for sterling over EUR on political and crisis fears. It also goes to show Sterling’s continued stance as a safe-haven even after losing its AAA rating. 1.527 likely still a hurdle after breach major support, but with momentum now at extreme low last seen in September 2011 a rebound is possible. EUR/USD remains in its downtrend having breached 7-month rising support, with single currency suffering and 1.30 (last seen early January) a real possibility on just political uncertainty never mind another batch of poor macro data.

In Commodities, Gold benefiting from rotation to safe havens and away from risk and back near the $1600 level last seen a week ago. In Oils, US Light Crude down near yesterday’s late-trading Italian election-fuelled lows of $92, maintaining February downtrend. Brent Crude doing likewise, down near last week’s lows of $113.5 on concerns over economic growth from a hampered Eurozone.

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

• Japan               Small Business Confidence                 Improved
• See Live Macro calendar for all details

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

• Elementis sales $757 million for year ended 31 December 2012
• Imperial Tobacco set minimum 10 pct dividend growth
• Dechra Pharmaceuticals profit rises
• Whitbread sees sales slowdown in Q4
• Robert Walters revenue of £567.8 million for year ended 31 December 2012
• CRH FY profit slips y/y
• Redrow ‘cautiously optimistic’ on continued growth
• AstraZeneca Naloxegol trial shows no imbalances in adverse effects
• Mwana Africa upgrades gold resource
• Hiscox to make special distribution of 150 mln stg
• GKN profit up 19 pct, sees European auto weakness in 2013