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

UK 100 called to open flat, with the index remaining within its 4-day trading range and direction absent as we open the last full week of trading before Christmas, or US Fiscal Cliff-mas as many are speculating.

Asian markets mixed, although Japan’s Nikkei higher after Shinzo Abe’s LDP (Liberal Democrat Party) claimed an overwhelming victory over the ruling Democrats and thanks to a smaller coalition partner sees them hold enough power to pass legislation without approval of the upper house.

Japanese Equities higher and the Yen (JPY) weaker again on expectations of aggressive pursuit of fiscal and monetary easing to boost the world’s #3 economy at a time when it is back in recession territory.

Elsewhere in Asia, Chinese equities higher on talks that policymakers will try and boost domestic demand in 2013 (rather than boosting exports, suggesting less optimism on global growth) attempting to revamp the economy by pledging to continue to implement prudent monetary and active fiscal policy.

In the US, there may have been some fiscal cliff progress over the weekend with the House speaker expressing some willingness to raise taxes for those earning >$1m in return for Obama making some major cost cutting (pensions, health). A step in the right direction, from one side, but far from a deal. Obama still wants tax rises for $>250K earnings and opposes cuts to entitlement programmes.

The UK 100 remains in its 4-day (5910-5965) trading although the last 3 days highlight a new resistance level at 5945. As we asked in our weekly roundup, Has Santa already delivered his rally? After the significant gains from mind-December, can catalysts be identified for another push higher? Or is this an early festive pause for breath before 2013 kicks off in bullish style?

This week’s focus will comprise the US Fiscal Cliff negotiations (or lack of), UK inflation which rose last month and may have ticked up again eating up slower wage growth. Minutes from the BOE will likely show limited calls for more QE, with markets anticipating a move being more likely in Q1. The UK’s final GDP reading is expected unchanged at 1%, but more focus on the poor figure likely to be reported in Q4. US manufacturing activity seen rebounding after effects of Superstorm saw growth curtailed, but readings expected to have remained negative.

In FX, GBP/USD remains northbound following the Fed’s QE4 announcement, and broken though recent resistance at 1.618. 3-montn resistance eat 1.63. EUR/USD heading the same way, making new 3-month highs above 1.315.  GBP/EUR bounced near 3-month support at 1.227. Resistance at 1.245.

In commodities, Gold back down near December lows, despite the USD weakening on the Fed’s QE4 announcement. Potential for 6-month rising lows to kick in as support around $1685. In Oil, both US Light Crude and Brent Crude benefiting from weaker USD, although mid-month resistance could prove a hurdle yet.

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

• Japan               Parliamentary Elections         Liberal Democrats win
• UK                    Rightmove House Prices         Growth Softened
• Japan               Machine Tool Orders              Contraction accelerated
• See Live Macro calendar for all details

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

• Imagination Tech raises MIPS offer to $100 mln
• Shell fixes UK Bacton gas terminal work for 2013
• National Grid says Ofgem proposals will take time to review
• Oxford Instruments buys U.S. nanotech firm
• Rolls-Royce wins Finnish navy contract
• Hunting says trading in line, Canada tax dispute resolved
• Kentz wins three Iraq contracts
• British Land agrees terms for Amlin let at Leadenhall
• Aggreko sees 2012 earnings per share up 15%
• Magnolia Petroleum Plc: Drilling Update