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

  UK 100 called to open flat at 6750 following a breakeven close by US equities on Friday and UK futures sideways overnight despite a largely positive Asian session helped by a stronger USD driving the JPY to a 5yr low helping Nikkei equities reach a 6yr high. The BoJ’s ‘full steam ahead’ on stimulus, while the US Fed scales back is also helping.

 While Europe closed higher on Friday US stocks failed to generate the same gains, despite a batch of taper-supportive US macro data (durable goods orders, housing, jobs) which boosted optimism (and the USD index) in the world’s #1 economy, with strong year-to-date equity gains and limited volumes the likely culprit.

 Europe also benefited from comments from the ECB/Bundesbank’s Weidman that sub-target inflation is ‘not a license for arbitrary monetary easing’ which gave the EUR/USD a brief boost (spike) to a new 2yr high of 1.39, before settling back below 1.375.

 In a weekend interview with German newspaper (Das Spiegel), ECB President Draghi also said he sees no immediate need for more rate cuts, and no deflation, which may boost recovery hopes and support the single currency.

 In terms of data overnight, UK Hometrack Housing Survey saw continued gains and we await an update of the Nationwide House Price Index which is seen showing accelerated gains – all still good for consumer sentiment but worrying in terms of housing bubble potential.

 In focus today, top-tier data remains US-focused which is apt given the nearing of the first Fed taper, with Pending Home Sales and the Dallas Fed Manufacturing competing with only Spanish Retail Sales and Italian sentiment & PPI.

 On Friday we expressed concern regarding the overextension of the UK 100 Santa Rally, and lack of pause for breath. That pause look like having started on Friday, with Daily momentum having peaked which may see a further the sideways move/correction.

 We note on the 3-month hourly chart (see UK 100 Focus publication later) that the Relative Strength Index (RSI) has already fallen back from overbought, and thin holiday volumes remain both a blessing and a curse. However, while some of the recent gains may evaporate for technical reasons, sentiment looks like finishing positive for 2013 and providing 2014 with a good start.

 Note the price of Oil receiving a boost, taking US Light Crude >$100 and Brent Crude >$112.5 despite a stronger USD after US EIA inventories dropped combined with increased growth optimism.

A look at Gold shows it continuing to languish around the low $1200s having found resistance at $1220 on good US macro data and thus a stronger USD. No let-up in the ‘annus horribilis’ for the yellow metal.

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