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

UK 100 called to open +5pts, but a muted response from the Bank of Japan (BoJ)’s policy board surprising the markets with a significant US Federal reserve (Fed)-style open-ended quantitative easing (QE) programme (starting this time next year, after current programme complete). It also met expectations by committing itself to a doubling in inflation target to 2% to beat deflation (it’ll take some time to reach) although the decision was not unanimous.

The bank also lowered growth forecasts and left inflation (deflation) unchanged, highlighting the tough road ahead and need for strong easing measures to boost growth. Asian markets mildly positive, although Japan’s Nikkei back in the red again as the buy-on-rumour, sell-on-fact theory manifests itself, and the weakening Yen (JPY) pulled back against the dollar (USD) denting exporters.

US markets were closed for national holiday, but early Asian sentiment helped by comment from Brussels that Eurogroup finance ministers had approved loan tranches for Greece and Spain and that Cyprus could be bailed out in March after elections.

Dutch finance minister Dijesselbloem confirmed as new Eurogroup head, replacing Juncker, but no breakthrough on direct bank recapitalisation by the bailout fund Euro Stability mechanism (ESM).

In focus today will be German ZEW Surveys which are seen having improved in January, notably economic sentiment, while the Eurozone figure will also be of interest for the region as a whole. In the afternoon, US Existing Home Sales will provide another gauge on consumer confidence and sentiment towards perceived wealth and propensity to spend.

EU finance ministers still meeting, European Central bank (ECB) President Draghi speaking after the European close and some big US industrial barometers reporting after the US close.

The UK 100 futures have continued their grind higher, but failed to do better than the yesterday’s overnight high of 6193. With the BoJ having pulled the trigger and concerns returning the US and its fiscal situation must we consider a double-top formation and downside to 6130? Or will the grind continue on rotation back into risk assets?

In FX, GBP/USD maintains its downward trajectory (falling highs and lows) as USD strengthens. Real test of mid-November lows at 1.583. EUR/USD in 7-day range of 1.325 and 1.34 as both sides of pair benefit from improved sentiment. GBP/EUR broken down yet further, with 1.185 and March lows now very close. Support at 2012 lows of 1.175?

In Commodities, Gold back at recent highs as appetite for risk continues, and despite USD strength, although narrow range on EUR/USD more indicative as yellow metal still in $10 range $1685-1965. In Oil, US Light Crude back at highs just above $96 despite stronger USD. Brent Crude still in 1-week uptrend trying $112 and closing in on Jan highs of $113 still benefiting from move into risk assets.

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

• Japan               BoJ decision                            Rate same, Inflation target, More easing
• Japan               All Industry Activity                 Better
• Japan               Leading Index                          Improved
• Japan               Coincident Index                     Improved
• See Live Macro calendar for all details

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

• Rio Tinto says cyclone threat to close Australian iron ore ports
• SABMiller revenues rise 17 pct in third quarter
• African Barrick Gold completes financing for Bulyanhulu plant
• Fastjet raises 500,000 pounds
• Marston’s says profitability in line with its expectations
• Dignity to acquire Yew Holdings
• Fresnillo sees silver output stable in 2013 after FY in line
• Egdon in farm-out deal with Hess for France permit
• Amara Mining sees this year’s output similar to 2012
• Ocado names Stuart Rose chairman designate
• Mwana says on track for off-take deal with Glencore in Q2