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

UK 100 called to open +5pts, with Asia positive again thanks to Japan benefiting from the prospect of elections (parliament dissolved, snap election now set for 16 Dec) and a change of power to a more pro-QE party (unlimited bond purchases by BoJ – JPY negative), even if the current economy minister labels the opposition’s stance as unrealistic.

Overnight, the IMF has encouraged more easing by the Royal Bank of Australia (RBA), whilst supporting its stance on fiscal tightening but warned of the potential for sharp deterioration in outlook. Worried about Asia – demand from China/Japan? China transition of power is now complete, but questions raised about conservatism at a time when growth is slowing.

In the US, markets subdued by dominant caution among stateside traders with the countdown to the ‘fiscal cliff’ (tax hikes, spending cuts) in January (Obama begins negotiations with Congress today), escalating tension in the Middle East, a batch of poor economic data (European GDP, US jobless and Philadelphia Fed hit by Storm Sandy), and the Eurozone’s persistent debt crisis woes.

Federal Reserve (Fed) Chairman Bernanke pointed sought to boost sentiment by pointing to the significant improvement in the US housing market (consumer confidence barometer), but clarified that progress needs to continue. Other Fed officials had differing stances on replacement of operation twist, and unlimited QE.

Back in Europe, the European Central Bank (ECB) members continues to show divided opinion on how to deal with Greece and its bonds – haircuts or not? German finance minister said a decision on the next tranche of Greek bailout aid will be taken at next Thursday’s Eurogroup meeting.

The IMF maintained its alternative stance to Europe on Athenian debt reduction target (no extension, no lower interest rates). Spain kept uncertainty high by stating that it does not require rescue money, contrary to newspaper reports it would ask for an emergency credit line from the IMF.

This mix of factors is maintaining the current correction back towards long term rising lows around 5600. A break of 5700 now looks necessary for any potential reversal of fortunes for the UK’s flagship equity index, although the dominance of negatives in the rundown above, a Greek resolution and progress on Capitol Hill look necessary pronto.

In FX, GBP/USD has spiked up to near 2-day highs this morning, after a potential bottoming out over the last few days on GBP weakening after poor Bank of England (BoE) inflation report and the door remaining open for more QE. EUR/USD still falling back from recent highs with regional woes/lack of progress regaining strength. In commodities, Gold looks to have found support at $1712, after plumbing week lows of near $1700 as the USD strengthened . US Crude still in the that $85/barrel zone, but Brent near $111 on Middle East tensions and supply concerns.

In focus today, we have limited macro data bar European trade balance this morning followed by US Manufacturing/Industrial Production which is expected to show accelerating growth for the former and slowing for the latter.

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

• Lafarge and Anglo American sell UK assets to Mittal
• Albemarle & Bond trading in line with FY expectations
• Serco posts improved H2 in line
• Lavendon sees FY in line with its expectations
• BP confirms Tangguh Train 1 operational, train 2 still offline
• Brammer says trading in line with expectations
• Salamander Energy maintains 2012 production forecast
• IMI says overall trading in line with management expectations in second-half
• Rotork expects full-year margins to be slightly lower than in 2011
• Bodycote sales grow 2.9 pct since July
• Melrose Plc says revenue trends have slowed
• Ultra Elecs sees flat 2012 profit as defence cuts bite
• Media Corporation Plc says interim CEO has stepped down
• Aegis says Q3 revenue rises 14.5 pct