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

UK 100 called to open -5pts at 6685, failing to capitalise on the positive finish last week in Europe and the US, and mirroring the overnight performance in Asia ex-China, as bourses trade around breakeven despite China & Hong Kong rally on wide-ranging reforms including the easing of the one-child policy, more private investment in state-controlled industries and more room for market forces in terms of pricing.

US bourses closed higher on Friday after weak macro data rekindled hopes of a taper delay, reinforcing the market reaction to dovish tones from Chair nominee Janet Yenne earlier in the week. Japan and Australia treading water overnight much like futures are indicating for the European and US opening.

In Europe, the ECB’s Noyer has played down an ECB divide saying the council was in agreement on the rate cut. Praet also said to a German newspaper that even with rates at zero, it has options and that no deflation but prolonged low inflation dangerous. Berlusconi acknowledged that after his party split he lacks the numbers to take down the government.

Overnight, macro data included a slight slowing in Japanese Housing Loans in Q3, in-line with the slower GDP than Q2 after stimulus-fuelled strength. UK Rightmove House Prices won’t make things easier for market observers, with a sharp drop in November, but annual growth still strong. With focus on China reforms, news of Property Prices accelerating (10 straight month of growth) may revive expectations of a need to rein things in.

In focus today, amid a very light macro calendar, we have US NAHB Housing which is seen ticking up a notch, however, outside that all eyes and ears will be on the raft of central bank speakers from the ECB and Fed. This key given the recent ECB rate cut and prospect of more stimulus, and the Fed minutes on Wednesday given the desire for clarity on taper timing.

Major data this week include German ZEW Survey on Tuesday with an improvement pencilled in. US Retail Sales seen pretty much unchanged in October, and inflation slowing (watch USD and Gold). European PMI data sure to add spice on Thursday with Services so key to GDP. Plenty of central bank speakers including Bernanke and Draghi. Friday sees final German GDP (confirmed as poor?) and IFO surveys. It could be an interesting week for EUR.

UK 100 has again failed to break back above the 6700 mark, trending down overnight towards 6680. Still off its 6610 lows, and potentially in a 4-day uptrend, but still also in downtrend from end-October with resistance around 6720.

In FX, USD basket weakened back to 80.8 after weak US data and expectations of a taper delay. GBP/USD up above 1.61 thanks to weaker USD, and now trading near 3-week highs. Not 1-month highs and major falling resistance at 1.625. EUR/USD still testing 1.35. Still in uptrend from lows of 7-8 Nov. USD/JPY taking a breather after regaining 100.

Gold still hindered by falling high from end-October at $1290, despite weaker USD. Despite rally off $1260 lows of 12 November, potential for a revisit given downward pressure from technicals, dovish talk, inflation not requiring hedging and lack of safehaven demand.

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