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

UK 100 called to open +10pts, with a lack of US fiscal cliff progress remaining the over-riding influence, and likely dictating the pattern of trading for this shortened holiday week (for traders and politicians). Concerns have kept Asian equities in check after politicians decamped from Washington for the holiday, taking the nation a step closer to the precipice.

The US Fiscal Cliff will remain an impasse over Christmas between the President (Democrats) and Republicans. A deal could of course still be reached this week, if you believe both sides’ determination to get there, however, concessions aplenty are required from both camps before the 1 Jan deadline.

After the failure of the House Speaker’s Plan B to avoid the cliff, internal rifts have been exposed within the Republican party, likely intensified since the President’s re-election and following the failure to make him concede in this game of fiscal cliff chicken.

In Europe, Italy’s technocrat leader Mario Monti has put an end to week of speculation by declaring himself ready to lead the country’s next government, and take a political stance, so long as he sees real support for his/the country’s existing and necessary austerity programme.

Geopolitical uncertainty has intensified in the Middle East with more deaths in the Syrian capital Damascus after an air strike on a civilian area, reinforcing the difficulties that the international peace envoy faces on its arrival.

The UK Banks are bank to the fore with a group of MPs and Peers pushing the chancellor on the issue of ring-fencing bank’s retail operations (protecting them from any problems elsewhere in the bank) to avoid any more “too big to fail” events and taxpayers footing the bill, but also making it robust enough that banks cannot circumvent it (electrify the fence).

Overnight macro data was limited to the UK’s Hometrack House Price Survey whose reading for December was unchanged from November’s -0.1% MoM and -0.3% YoY indicating continued softness in the market and a consumer confidence being held back.

The UK 100 is off its lows of Friday morning, and with an intersecting trendline of support from end-November at 5900, which along with rising highs from mid-December at 5990 could suggest a shallow rising 90pt channel and a chance of the fabled 6000 level being hit by year end. While we trade in the middle of the range, the fiscal cliff may decide the destination, but there is enough macro data this week to provide influence.

There is no macro data to focus on today, in what is a shortened trading day for most European markets, however, not that overnight while Father Christmas is delivering presents, the Bank of Japan (BoJ) will be publishing the minutes of its last meeting. This is the last before pressure is applied by recent general election winner Shinzo Abe who wants the bank to take a more aggressive monetary policy stance to boost the economy. The Japanese yen (JPY) is weaker as a result.

Later in the week, all eyes will of course be on the US fiscal cliff, but data-wise keep an eye on Chinese Industrial Profits early on Thursday morning. After the recent fall in foreign investment on slowing growth concerns, this could provide more clues on the nation’s growth profile. Given the US Federal Reserve’s (Fed) explicit linking of unemployment to monetary policy, US Weekly Jobless Claims will be of interest as usual, although any major surprise (up or down) is unlikely. US New Home Sales are always good as a consumer confidence gauge on both Thursday and Friday, as will the Conference Board’s Confidence figure itself. European data thin on the ground.

In FX, GBP/USD has found some support around 1.615 lows overnight after Friday’s bout of fiscal cliff risk-aversion and safe-haven seeking in the greenback which ended a 6-week rally by the pair from 1.583 to reach highs of 1.63 (matching those of late September). EUR/USD also found support around mind-month levels of 1.316 after the 6-week rally from 1.265, on a combination of USD devaluing via QE and renewed European ad single-currency optimism. GBP/EUR remains depressed (but with support) around 3-month lows of 1.225 on account of EUR strength and prospect of more QE from the bank of England in Q1 to reignite growth which is expected to have gone negative in Q4.

In Commodities, Gold, having tested below its 200-day moving average at $1664, on account of USD demand on risk aversion (makes commodities ore expensive) has found some support at $1635 thanks to a trendline of rising lows in place since mid-May. Rebound or Southbound? US politicians the likely drivers. As for the Oils, Brent Crude under a little more pressure than its US Light, although  both victims of the stronger USD.

Happy Christmas to you and your families, and if you require help placing trades or with market information during the festive period, just put a call in to our trading floor – all part of the value-added service.

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

• UK                    Hometrack House Price Survey           Remained weak
• See Live Macro calendar for all details

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

• Instem says contracts required to meet profit expectations for the year are pending
• LSE extends LCH.Clearnet offer to finalise terms
• Servicepower Technologies expects to post a loss for the year
• Micro Focus Intl buys software lines for $15 mln
• Oakley Capital sells Emesa Group Hldgs for 95 mln euros
• ITV buys stake in Gurney Productions for $40 mln
• Aqua Bounty Tech updates on FDA approval
• Top Level Domain Hldg appoints new CFO
• Electric Word says trading in line
• Smith and Nephew completes Healthpoint acquisition
• Corin Group appoints new CEO