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

UK 100 called to open -20pts, after a weak session in Asia (Japan up only because playing catch-up from holiday) after the Japanese economy minister talked of concerns that the very (overly) weak Japanese Yen (JPY) could have a material effect on import prices and thus consumer livelihood.

The prospect of the minister putting a cap on easing sapped recent optimism and saw a strengthening in the currency after its recent run of weakness. Is that it from the new PM? Has he played all his cards on pushing for measures such as a dual inflation/unemployment mandate?

After the mixed US close, dented by Apple cutting orders for parts for the iPhone 5, Bernanke’s speech weighed slightly on sentiment with the Fed Chairman playing down recent FOMC minutes (suggesting a 2013 end to QE) and refereed to a still fragile US economy, but hinted that an improved housing sector was a positive.

Press conferences from the President and House Speaker also confirmed the continued division between the two camps on raising the debt ceiling. Expect a similar situation in the run-up to the new fiscal cliff deadline at the end of February.

Overnight macro data included an improvement to UK House Prices back to breakeven, although Japanese machine tool orders weakened even more than last month and German Consumer price inflation was a touch weaker than expected (although it did at least improve to 2.0% YoY from the prior month.)

In focus today will be the 2012 German GDP at the market open given the weakness in the Eurozone itself. Can it remain a semblance of growth engine or are external issues weighing too much? Later the UK updates on all the main inflation prints for December, with consensus looking for CPI and RPI unchanged on the prior month but PPI accelerating slightly (headline and core). Spain also selling more short-term debt (make hay while the…..yields are low).

In the afternoon, US data comprises an expected improvement in the New York Fed Manufacturing index, but a slowing in Retail Sales in December, however, Producer Price inflation should be unchanged, with maybe even a little fall in core prices. To close the day, US Business Inventories seen growing a touch slower in November.

The UK 100 has pulled back from its 6140 highs and back to the previously key 6100 level having broken below the trendline of rising lows we pointed to yesterday as a potential rising and bullish wedge pattern. If this is a correction, potential support available at the 6050 level available thanks to both rising and falling support trendline (see UK 100 focus publication).

In FX, the EUR/USD has slowed up at its highs of yesterday following a significant up move and break of 8-month resistance at 1.33. Whether this becomes support remains to be seen. EUR been stronger on prospect of no rate cuts from ECB. USD strengthened overnight on possibility of US economy not being as strong as expected.

The GBP/EUR pair has found support at 1.20 after breaking below trendline of falling support at 1.21 on account of EUR strength and pressure on GBP from worsening economic and fiscal situation and possible loss of AAA rating. GBP/USD falling back towards 6-month rising support at 1.605.

In Commodities, Gold helped by stronger EUR denting the USD taken the yellow metal back near 1-week highs of $1675, even after the overnight strengthening in the USD. In Oil, Brent Crude has come off its recovery highs of $112, dented by overnight USD strengthening. US Light crude also off recovery highs of $94.3, but still closer to 2013 highs ($94.7) than its Brent cousin.

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

• UK                    RICS House Prices                   Better
• Japan               Machine Tool orders              Declines worsened
• Germany         Consumer Price Inflation        In-line, a touch weak
• See Live Macro calendar for all details

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

• Rio Tinto iron ore output tops 2012 guidance at record 253 mln
• Halfords raises full-year profit expectations
• Ashmore says assets rise to $71 bln
• Spirit Pub says on track to deliver full-year expectations
• Alliance Pharma sees profits ahead of forecasts
• Bwin Party says Joachim Baca setps down from board
• Cluff Natural Resources names new CFO
• Smiths News says on track for strong growth in earnings
• Mears sees full-yr results in line with forecasts
• IGAS Energy proposes placing to raise 23 mln stg
• Dragon Oil says production rises 10 pct in 2012
• Michael Page 2012 gross profit falls 1.5 pct
• Lavendon says full-year results seen at upper end of expectations
• Kier raises new funds with private placement
• Burberry third-quarter revenue up 9 pct
• Ocado Christmas sales rise 14.2 pct
• IG Group blames low volatility for revenue and profit falls
• Provident Financial sees annual results in line