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

UK 100 called to open +20pts despite the Cypriot Parliament’s outright rejection of the €5.8bn bank levy proposal as part of the island nation’s €17bn bailout, with Nicosia calling Europe’s bluff and looking for assistance from ‘old friend’ Russia to help it remain part of single currency bloc and restore regional clam.

Last resort? Or will Europe come around? Or does the proposal keep being tweaked and voted and rejected again, and again? The Troika is making an example of Cyprus (€6bn is small change vs. other PIG bailouts), wanting to hurt it and send strong message to rest of region. What can possibly be asked of the nation that is popular enough to be voted through? Surely the money has to come from elsewhere. Finance minister tendered resignation. President rejected. Who’d replace him?

Asian markets mixed, although Japan closed for national holiday which coincides with the change of guard at the BoJ but proved a non-event for the JPY and all eyes on any emergency stimulus announcement before the scheduled April meeting. US markets hampered by Cyprus developments with initial optimism negated by ‘no’ vote. Caution ahead of Fed FOMC meeting today and press conference update on economic projections.

Quiet Asia helping with relative stability, despite fears of European contagion and bank runs remaining prevalent (although the ECB has reaffirmed its commitment to provide further liquidity to Cyprus under existing rules) and resources sector continuing to be being weighed on after broker downgrades and negative comments from industry member.

Chinese equities outperforming, likely on broker concerns of slowing demand fuelling stimulus hopes, but and despite a central bank (PBOC) survey suggesting property prices still too high adding to the possibility of tighter policy. Yin and Yang; push and pull.

In focus today will be the Cyprus – no change there – with the Chancellor’s UK budget taking second place. That’s likely good news for him, with distractions welcome as he likely announces another batch of bad news, with stagnant growth continuing to hinder deficit and public debt targets, yet again, inflation squeezing household and now life without the prized AAA rating.

UK employment seen pretty stable, highlight gap between jobs and GDP growth. UK BoE MPC minutes keenly watched for change in voting on more stimulus (QE). Could we have moved from 6-3 against to 5-4 against, a step closer to more printing? Thereafter, it’s all eyes on the Fed’s FOMC rate announcement, press conference and update on economic projections. No change expected for the former, but the others could provide some colour on duration of QE.

UK 100 trading in narrow 6415-6475 range with markets awaiting decision on Cyprus from Nicosia or those holding the bailout purse strings. Having made little progress since yesterday, we still believe a 100pt swing either way is possible with market sitting at between recent high 6551 and low 6345.

In FX, GBP/USD still trading sideways at 1.51. Drives include UK budget (could be ugly, but unlikely a surprise), Cyprus situation and Fed announcement. EUR/USD tested new multi-month lows on single currency bloc concerns derived from Cyprus. The 1.30 and 200-day moving average now almost 1 whole point away.

In commodities, Gold bounced back up above $1600 on safehaven seeking and despite USD strengthening against EUR. In Oil, US Light Crude repeated recent sell-offs and found support around $92.5. Resistance likely $94.5 Brent Crude tested new –month low of $107.5 yesterday on global demand concerns, but regained $108 overnight.

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

• Aussie              DEWR Internet Skilled Vacancies       Deteriorated
• Germany         PPI                                                       Worse

See Live Macro calendar for all details

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

• Optos on track to meet its full year expectations
• Smiths Group says headline H1 pretax profit at 233 mln STG
• First ‘easyhotel by Lonrho’ to open in Africa
• BowLeven says good progress made towards Etinde project development
• IQE says strong momentum continued into new year
• ASOS sales surge again in Q2 on strong home demand
• Geopark bring new Colombia oil wells into production
• Restore buys records management business
• Greggs says investment to hold back profit growth
• Kazach miner ENRC tumbles to full-year loss after impairments
• Wood Group wins 11 new Africa contracts