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

UK 100 called to open +5pts at 6735, still oscillating around 6730, following another weak US equity close thanks to mixed macro data (factory orders rebound, ISM services miss) suggesting an uneven US recovery ahead of Qe3 tapering and a mixed session by Asian bourses.

Japan’s Nikkei weak as the gains of last year and the planned sales tax hike still weigh, although this was offset to some extent by a weakening in the JPY from its recent rally. China, Hong Kong and Australia swinging between gains and losses as recent weak China data continues to weigh into the New Year.

Note Samsung’s profits warning overnight, expecting a steep drop in Q4 operating profit on slowing smartphone sale, increased competition and a strong South Korean Won. This would be the first decline in more than 2 years. Beware knock-on to European tech names.

With QE3 tapering set to begin this month, Fed Chairman Ben Bernanke’s successor Janet Yellen was finally given Senate approval, and with the ECB and BoE making policy decisions this week there was a report suggesting no major changes at the former.

After pre-Christmas fears of a China credit-crunch, it would appear that oversight is rapidly tightening on the shadow banking sector in an effort to slow the run-up of debt and bolster financial stability. Note this comes after a recent audit highlighting very high local government debt. Note the PBOC declined to intervene again as borrowing costs ease.

Overnight data comprised a stronger than expected improvement in the November Australian trade deficit, and a big rebound in German Retail Sales in November. The UK BCC quarterly Manufacturing survey shows growth will continue and probably strengthen in the short-term, Services accelerated in Q4 with jobs at record high. The report suggests it implies Q4 UK GDP of 0.9%.

In focus today we have Eurozone CPI which is expected to have softened again in December, and key will be whether the core reading holds up. Nevertheless, both remain well below target and calls for another ECB rate cut, however, Producer Prices are seen improving from on their negative readings in November.  In the afternoon, the US Trade Deficit is expected to have improved slightly.

The UK 100 maintains its sideways course within the 6700-6750 range.  We await a breakout of 6750 to revive long-term uptrend hopes. Rising lows from 4 Jan at 6730 are a positive even if daily momentum continues to drop and the 3-month hourly RSI has falling resistance.

Gold still trying for $1250 but stopping just shy. Helped by slowing in liquidations, physical demand and some short-covering.  This is offsetting USD strength and lack of safehaven demand.  The price of Oil remains depressed by the prospect of more supply keeping US Light Crude stuck around $94 and Brent around $107.

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