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

UK 100 called to open +5pts, after Asian equities posted more solid gains on the back of the better than expected trade balance (surplus rebound) print from China which rekindled optimism (and maintained the 2013 post risk appetite) in the world’s #2 economy’s growth recovery.

Within the data note the significant rise in Exports (14%) suggesting better global demand and the increase in imports (6%) which can serve as a gauge of domestic consumer confidence. Those looking at domestic Chinese confidence may, however, point to the drop in New Loans which could be seen to be at odds although as the old saying goes “one swallow does not a summer make”.

US markets closed higher, after 2 days of falls, benefiting from the solid start to the US earnings season from Alcoa (reported Tuesday night). All eyes now on Wells Fargo on Friday as its serves as the curtain-raiser for the US financial sector and could provide the first signs of how the last quarter of 2012 went and more importantly what the outlook is for 2013.

Asian markets still buoyed by reports that Japan set to take further policy easing moves at the Bank of Japan’s (BoJ) next meeting in 10 days. The Japanese Yen (JPY) remains under pressure versus the dollar (USD) and the equities of exporters continue to benefit. New PM Abe still asking for 2% inflation target to combat deflation and more policy easing to revive the economy but says while he will continue to pressure the BoJ he will leave monetary policy decisions in their hands.

In focus today will be the interest rate announcements from the Bank of England (BoE) and European Central Bank (ECB). While neither is expected to move rates and the former unlikely to alter its QE programme, the latter’s press conference will be looked to for signs president Mario Draghi keeps the door ajar for more interest rate cuts as he did in December.

The UK 100 at 6100 is back at the top end of its recent 50pt range having broken above the short-term trend of falling highs which had been a worry in terms of a potential correction after the significant end-of year and New Year gains. Appetite for risk still strong, helped further by the Chinese overnight data and the satisfactory start (albeit just 1 company) to US earnings season.

In FX, GBP/USD almost unmoved from yesterday with the trade-off in end-of-QE-fuelled safehaven-seeking in the dollar offsetting likely no change in policy by the BoE. Support possible at round number and 1-month lows 1.60, although note the continued falling highs in 2013 which could cap upside. EUR/USD trading higher at 1.307 up off yesterday’s 1.304 low (support from trendline of rising lows) despite possibility of the ECB leaving potential rate cuts on the table. Markets pricing in the door being closed? Resistance likely at 1.31. GBP/EUR still under pressure trading down near 2013 lows around 1.226 suggesting talk of possible rate cuts being avoided in the ECB’s January presser.

In Commodities, Gold still trading in tight range, similar to that seen by GBP/USD, although the week-high increased to $1666 yesterday and we still have rising lows from last week despite the USD strengthening. Next resistance still likely $1670. Oils still trying higher with US Light crude back at 1-month highs near $93.8, again despite USD maintaining its strength in the face of better Chinese data which has boosted risk-appetite elsewhere. Brent Crude not quite at 1-month highs, but trying back to best levels of Tuesday at $112.5.

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

• Aussie              Building Approvals                              Mixed
• China               Trade Balance, Imports & Exports     Better
• Japan               Leading & Coincident Indices             Deteriorated
• France             France Business Sentiment                 Better
• See Live Macro calendar for all details

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

• Hays net fees fall on Australia mining slowdown
• Hardy Oil and Gas in talks on GS-01 exploration block
• TT Electronics says trading at end of 2012 in line
• SIG expects construction markets in 2013 to remain challenging
• Pace sees 2012 beating guidance after strong H2
• Bunzl completes 3 buys in Latin America, U.S
• Rolls-Royce appoints Lord Gold to lead compliance review
• Rathbones funds rise 13.4 pct in 2012
• Sinclair IS Pharma sees H1 revenue up 4 pct
• Bwin.party says trading meets expectations
• XP Power says 2012 revenues down 9 percent
• Rio Tinto suspends iron ore shiploading as Australia cyclone shuts 2 ports
• Hilton Food expects trading environment in Europe to remain challenging in 2013
• JD Sports like-for-like sales up 3.2 pct in seven weeks to Jan.5
• Patagonia Gold names Carlos Miguens as Chairman
• Sirius Minerals gets key approval for York potash project
• Ithaca Energy sees 2013 capex of $360 mln
• Tesco posts strongest UK growth for three years