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

UK 100 called to open -10pts, despite Asian markets mostly higher after a strong batch of Chinese data over the weekend (inflation a touch light which is stimulus, Industrial production and retail sales better). However, this has been offset by weaker than expected Japanese GDP (technical recession confirmed) and a shock drop in Chinese Trade Surplus on account of a slump in exports. After suggesting the world’s #2 economy’s was on the mend, questions on slowdown being asked again.

Having traded again near the highs of Friday, the UK’s UK 100 Index has also failed to push any higher overnight, giving back gains on a mix of macro data and implied political uncertainty from Rome, with technocrat and pro-austerity prime-minister Monti tendering his resignation after Berlusconi announced his return to politics and putting a spanner in the works.

Although better than expected, US employment has failed to maintain equity recent gains, with scepticism that the beat for November was offset by downward revisions for October and September, that Superstorm Sandy will impact December’s number and that the improvement in unemployment rate was linked more to people giving up looking. The US Fiscal Cliff (tax hikes, spending cuts) discussions look to remain without progress, limiting optimism and index advances.

Overnight, macro data includes a worsening in the Lloyds Employment confidence indicator and Aussie New Home Loans, however, German Exports and Imports were both better than expected leaving the trade balance in-line, offering a rare ray of light amid Europe’s negative data.

While the UK 100 may continue to struggle at the trendline of long-term falling resistance around 5920, negative sentiment may be offset by expectations that the US Federal Reserve (Fed) will announce more QE after ‘Operation Twist’ expires at the end of the year. News on QE3+ or QE4 this on Wednesday could offer a helping hand to any breakout.

This week’s main event will be German ZEW Survey data on Tuesday, with expectations of slight improvements. The US Trade Deficit is seen widening a touch. Eurozone Industrial Production is seen recovering in October while UK Unemployment is seen stable at 7.8%, potentially not having have peaked given the recent downgrade of growth forecasts and extension of austerity. Friday will provide an update on Eurozone PMI manufacturing and services, still in contraction but slight improvement.

In FX, GBP/USD weakened back again after US Non-Farms payrolls on expectations that the numbers are it enough to stop currency weakening QE. Support at 1.60? With EUR/USD the pair is trying lower again overnight with the region’s woes trumping the weaker USD. Support at 1.288? GBP/EUR continues to strengthen having broken above the 1.24 level, with Eurozone uncertainty weighing more than prospect of more QE from the BoE.

In commodities, Gold found support at $1700, and testing 4-day higher helped by the weaker USD. Resistance at recent breakdown from November support at $1710? The Oils (US Light Crude and Brent Crude) have also maintained their rebound from recent lows after the USD weakened. US Light Crude bounced off $86 and trendline of rising lows, while Brent Crude rebounded from 1-month lows at $106.75.

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

• China               CPI & PPI                                 Worse
• China               Industrial Production              Better
• China               Retail Sales                             Better
• China               Fixed Asset Investment           Worse
• Japan               GDP                                         Worse
• UK                    Lloyds Empl. Confidence         Deteriorated
• Aussie              Home Loans                            Worse
• China               Trade Balance                         Worse
• China               Exports & Imports                   Worse
• Germany         Trade balance                         In-line
• Germany         Exports                                    Better
• See Live Macro calendar for all details

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

• BAE Systems wins 1.2 bln stg British submarine contract
• Volex FD Cherry to leave next March
• UK Coal names Jonson Cox chairman
• UK Coal says completes restructuring
• Imagination Tech makes revised offer for MIPS
• Pursuit Dynamics names Hagen Gehringer CEO
• A.G.Barr confident on FY as revenues rise
• Andor Tech names new FD
• Southern Cross Media says suspends all advertising on 2Day FM until further notice
• Aer Lingus to ‘wet lease’ 4 planes to Virgin
• Great Portland acquires South Bank building
• Advanced Computer Software buys Serco Learning
• Shanks signs bottle recycling deal with Heineken
• Sweett wins TfL consultancy deal
• Resolution severs links with advisory firm