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

UK 100 called to open +20pts at 6785, maintaining its rebound yesterday from near festive lows on US earnings and taper concerns to get above the festive highs, offering the possibility that the latter reverts to support and allows the long-term uptrend to resume.

European and US stocks staged a broad recovery helped by better than expected US macro data and US banks JP Morgan and Wells Fargo kicking off the US Q4 banks earnings season with modest EPS beats, even if the former saw profits slide year-on-year and one-offs and adjustments again feature highly.

After Lockhart on Monday, it was the turn of the Fed FOMC voters Fisher & Plosser to wade in with hawkish comments, the former suggesting a $20bn taper and Plosser calling for the end of QE in 2014. This, however, did little to exacerbate fears of too fast an exit from extraordinary stimulus and derail US optimism, with US bourses holding near recent highs.

Overnight, global sentiment likely taken solace from the World Bank upping its global growth forecasts for 2014 and 2015 based on a recovery by richer nations but cuts its 2014 growth in the developing world and China.

Asian bourses followed Europe and US equities higher, but not quite recouped the losses of the prior day. Japan helped by weaker JPY. Macro data included Japanese money stock growth in-line and a rebound in Aussie New Motor vehicle sales (even if prior month revised up sharply). Note also Chinese Bank Lending showing a drop, but an increase in aggregate lending suggesting shadow banks taking up the slack.

In Europe, we have also seen the EU reach a deal on regulating financial instruments which will force more off-exchange trading (dark pools, Credit Default Swaps [CDS], derivatives) into the open, limit commodity speculation and reform of high frequency trading (HFT). Expected to be written into law in Q2, but enforceable only end-2016.

Note ECB vice-president Constancio saying negative interest rates and OMT instruments are available to counter low inflation while Draghi said sovereign debt that is being held to maturity will not be marked-to-market in upcoming AQR bank stress tests. French President Hollande pledged more tax cuts to help domestic businesses.

In focus today we have German GDP seen printing slightly slower growth in 2013. At a time of worrying eurozone dis-inflation, Spanish inflation expected slower but core unchanged. Eurozone Trade balance seen largely unchanged. In the afternoon, Bank of America Q4 results (seen flat) followed by US Empire State Manufacturing and US Producer Prices seen rebounding. The BoE’s Carey speaks mid-afternoon and the US beige Book update evening.

The UK 100 is now above the bugbear resistance of 6775 since Christmas eve. This level could revert to support to help any further advance of the long-term recovery. Could this be the end of that sideways move. Daily momentum back positive.  Note the sharp swings in sentiment. Be prepared.

In FX, the USD index is back up around 81 after positive macro data and bank results supporting tapering and hawkish Fed member comments. GBP/USD holding around 1.64 while EUR/USD falls back from 1.367 on dovish ECB comments. USD/JPY back above 104.

Gold back below $1250 after the USD strengthened and a boost to US and global growth sentiment saw reduced need for a safehaven. Neither of the benchmark Oils are moving much with US Light Crude held $91.5-93 and Brent around 2014 lows of $106.

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