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

UK 100 called to open +15pts, thanks to a largely positive Asian market session, this despite a negative handover from the US after mixed macro data on jobs and Retail Sales and no progress emerged on the US Fiscal Cliff after Obama and Boehner’s short closed-doors meeting. Boehner still maintains White House not serious about cutting costs, but says communication channels still open. Obama optimistic of deal, but will either side concede before Turkey is served?

Asian markets helped by overnight macro data which showed China HSBC PMI Manufacturing hitting a 14-month high just ahead of consensus, and maintaining the positive data out earlier in the week which suggests the world’s #2 economy may be recovering. Chinese equities +4%, helped also by a think tank suggesting GDP growth of 8.0% and inflation of 3.0% in 2013.

After solid gains on the prospect of a power change and more policy easing, Japanese equities on the Nikkei were weak after sentiment readings from manufacturers fell to their lowest since Q1 2010, while final October industrial production readings were weaker than preliminaries, although capacity use was better.

Bad news for the UK’s AAA rating with S&P making it a hat-trick of ratings agencies to put the nation on negative watch, expecting debt-to-GDP to rise in 2015 instead of stabilising in 2014 and efforts to manufacture a fiscal correction likely hindering growth. Peer Fitch has also in the last 30 mins reaffirmed France’s AAA rating (the only agency yet to downgrade) although still on watch negative and a 50% change of downgrade in 2013.

Back in Europe, EU leaders look happy with the progress among their finance ministers on steps towards a banking union with certain seeing introduction along with ESM within 12 months (too soon?). However, certain decisions (Eurozone budget, economic reforms) have been delayed until next year. Merkel also stated that leaders had agreed on a roadmap for the future of the single currency with a focus on boosting the region’s competitiveness.

The UK 100 has come off its 9-month highs of 5960 having ground higher for the past 10 days. However, having broken above 5915 and subsequently bounced off the level last night it could well be that the level has reverted to support, proving a platform for further advances. Santa Rally still valid although caution as to what presents the bearded one delivers.

Today’s focus will be on Eurozone PMI Manufacturing and Services with all but German Services expected to show continued contraction albeit slightly improved from prior readings. In the afternoon, it’ll be over to US PMI Manufacturing which is seen dipping but industrial production/capacity use improving.

In FX, GBP/USD off its highs but found support at 1.61. Still in uptrend from mid-November after Fed pulled trigger on more QE. EUR/USD rallied above 2-day highs at 1.31 to close in on December highs on a combination of Fed’s QE4 and Eurozone progress. Resistance possible again at 1.313. GBP/EUR continues to weaken back from December highs after the EUR strengthened on Eurozone progress and GBP took another warning shot across the bows from the ratings agencies this morning. Support possible around 1.23 then Oct lows at 1.225.

In commodities, Gold found support at $1690 after a big falloff but regained $1700 to trade within a very narrow range. This despite the USD remaining weak. In Oil, US Light Crude rallied from $86 on USD weakness but may find resistance around $87. Brent Crude registered another rising low at $106.5 and rallied on USD weakness. Resistance possible at $108.

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Overnight/Weekend Macro Data: (Source: Reuters/DJ Newswires)

• China               HSBC PMI Manufacturing       Better
• Japan               Industrial production             Growth slowed
• Europe             New Car Registrations            Contraction accelerated
• See Live Macro calendar for all details

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

• Reliance, BP shut 7th well at India’s KG-D6 gas block – source
• Bwin.party enters Belgium deal with Belcasinos
• Punch Taverns says profit performance in line
• G4S to buy South African cash group Deposita
• Harvey Nash says Julie Baddeley to become chairman
• Laura Ashley sales rise in 19 weeks to Dec 8
• Volex downgrades forecasts
• Immunodiagnostic names new FD
• Moss Bros on course to deliver targeted growth