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

UK 100 called to open flat (again), despite a large positive Asia, with the exception of Japan’s Nikkei which is still being hampered by a stronger JPY following the confusing and volatility-fuelling G7 statement yesterday which initially said peers not concerned about currency manipulation and so called ‘currency wars’ to benefit domestic growth, seeing JPY weaken, helping equities, but then clarified to “we are concerned” seeing JPY strengthen again and remaining so overnight.

Several markets still closed for the Lunar New Year celebrations keeping things quiet overnight, with the only bit of macro data being a strong 7.7% improvement in Australian Consumer Confidence and a rebound in Japan’s Tertiary Industry.

US markets closed higher (although tech was weaker) ahead of US President Obama’s State of the Union address in which he put the ball back with the Republicans in terms of reaching a deal on the $1.2tn sequester of spending cuts which threaten to dent US economic growth, and derail recovery from the downturn.

He also pledged to use his position of authority to tackle climate change and manufacturing, while calling for a rise in minimum wage (surely at odds with boosting employment given corporate uncertainty) and confirmed talks on a US-EU bilateral trade agreement.

In focus today will be the Eurozone Industrial Production data which consensus sees improving on November’s weakness, while US Retail Sales growth is expected to have fallen back to a more pedestrian speed of expansion. In the evening, given the focus on its currency and measures being used to stimulate economic growth, Japan’s Q4 GDP figures will be of interest in terms of a line in the sand as to how much work is required. Positive figures expected, but sustainable?

The BoE’s Quarterly Inflation Reports mid-morning may not be considered of as much interest as usual, with the MPC having issued a statement alongside its recent rate and QE decision stating inflation will stay above 2% target in medium-term before falling back in two years (believe that and you’ll believe anything). It is also one of Sir Mervyn King’s last appearances/pressers before Mark Carney (current BoC Governor) takes the reins, and so surprises may be limited. However, with the threat of recession (triple-dip) still possible, information on future stimulus will likely be sought.

UK 100 futures broke above the February trend of falling highs helped by volatility from G7 regarding currencies as well as solid result from Barclays back which took the whole banking sector up and accounted for around half of the index gains. While the index has pulled back from yesterday’s highs, note that Ex-dividends account for 17 points with payouts from AstraZeneca (120.5p, 4% yield) taking off 5.93pts, BP (9 cents) 4.28pts, Royal Dutch Shell (86 cents) 6.88pts and Sage (6.67p) 0.32pts.

The break higher opens up the possibility of a return to the recent and 4.5yr highs of 6360 where resistance may re-emerge, however, the refusal to correct as far as 6150 (-3.5% from highs) as we wrongly anticipated could mean that there is enough momentum still lingering to push through it. And move on towards the magic 6400 level last seen in May 2008.

In FX, GBP/USD found support again at long term rising trendline at 1.565. Resistance still possible again around 1.58. EUR/USD on the march higher again with a potential bullish flag pattern which could lead to a break back above 1.35. Momentum broken above falling highs. GBP/EUR still under the cosh and trying back near the 1.60 level, having failed to break out above 1.18.

In Commodities, Gold back below $1650 having tried higher briefly but still struggling from stronger USD. Is this a pause before yet another leg lower? In Oil, US Light Crude resistance at $97 was short-lived and a move towards $98 (where resistance likely) has materialised despite USD strength and based on improved macro outlook (currency war fuelled?) and continued cashing in on widening of spread between US Light and Brent from recent extremes. Brent Crude still in uptrend, but with support at $118, but highs of $119 yet to be broken over short-term.

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

• Germany         Wholesale Price Index                                    Better
• UK                    Reckitt Benckiser Q4 12 Results         Better
• France             Total FY 12 results                              In-line
• France             Société Générale FY 12 Results          Worse
• France             PSA Peugeot Citroën FY 12 Results     Worse
• See Live Macro calendar for all details

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

• Crest Nicholson sets offer price at 220 pence per share
• Vectura says trading in line
• Tullow Oil writes off $671 mln for failed drilling, values
• Oxford Instruments says remains resilient
• Phoenix IT warns on earnings, some contracts slip
• Soco says 2012 production soars
• Northcote increases interest in Horizon project
• Speedy Hire confident will meet year expectations
• Redstone to demerge network services unit
• Bayfield Energy updates on January production
• Reckitt Benckiser beats earnings forecasts
• African Barrick Gold says to focus on costs as FY earnings fall
• Harvey Nash says results to be ahead of forecasts
• TUI AG beats expectations on TUI Travel, hotels
• Bakrie urges panel to expedite Bumi inquiry