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

UK 100 called to open +30pts at 6730, after a largely positive session in Asia, with Japan’s Nikkei outperforming thanks to improved Current Account and Trade balances and the strong US employment data from Friday leading to a strong USD and thus weaker JPY (USD/JPY >99) which benefited exporters.

Sentiment also buoyed by solid Chinese Industrial Production and Retail Sales, even if inflation figures were a bit lighter than expectations and supported hopes of an economic recovery in the world’s #3 economy.

Other data overnight included improved Aussie Home Loans and Investment Lending and mixed Japanese Eco Watchers surveys and improved levels of bankruptcy. US lawmakers appear also to be seeking more sanctions against Iran after talks on limiting nuclear programme fell short.

US markets closed higher on Friday after the big Non-Farm Payrolls beat, with markets taking the data as a signal of economic progress rather than good data being bad for Fed stimulus. We also believe markets less worried by an earlier tapering of QE3 given that unemployment ticked up, GDP was flattered by stock-building and more evidence needed.

Fed member Lockhart reiterated aggressive monetary policy still needed for quite some time but would not rule out a December taper which maintains the rhetoric we see from the FOMC which keeps the outlook muddied designed to temper enthusiasm and avoid another easy money bubble and a messy bust.

In Europe it would appear we have North-South divisions at the ECB regarding last week’s rate cut which may lead to a German backlash and troubles on forthcoming critical decisions on a banking union and any more stimulus efforts to help the region. One German member said united on price stability, while another said dis-inflation not the only reason for the rate cut.

In focus today we have a rather empty macro calendar on account of it being a public holiday in the US for Veterans day although equities will be trading. Spain Housing and Italian industrial production are all we have to look forward do along with some central bank speakers. This is also the penultimate day of China’s political plenum where the nation decides on policy for the coming decade.

UK 100 back up above the 6705 level which had been support since late October. This allows for upside to Thursday highs of 6780 then Tuesday’s 6820. We note momentum recovered to positive on the daily chart which revives possibility of a resumption of October uptrend, but we have some falling highs around 6760 to beat.

In FX, USD basket back again off 81.6 highs having benefited from the strong US jobs data ad prospect of earlier tapering. GBP/USD recovered to 1.60 after US jobs data lead to a 1.5c drop from 1.61. EUR/USD around 1.35, with support at 1.33 but pressure from stronger USD. Note USD/JPY regaining 99 near 1-month highs.

Gold still held back around $1285 after the drop below $1300 following the US jobs data and USD rally. Falling multi-month resistance at $1350 remains a significant hurdle and downward pressure since March means possibility of a revisit of $1250.

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

• CN            CPI                                                   Miss, accelerated
• CN            PPI                                                   Miss, deteriorated
• CN            Industrial Production                      Beat, accelerated
• CN            Fixed Asset Investment                   Miss, slowed
• CN            Retail Sales                                     Miss, unchanged
• JP             Current Account Balance               Beat, improved
• AU            Home Loans                                    Beat, rebound
• JP             Sentiment Surveys                          Mixed

See Live Macro calendar for all details

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

• Sage appoints Steve Hare as CFO
• BT WINS EXCLUSIVE UEFA BROADCAST RIGHTS FOR UK
• Dignity says outlook remains positive, expectations unchanged
• Lonmin says Q4 platinum production climbs
• Hammerson sees signs of recovery in UK occupational markets
• John Wood boosts U.S. shale unit with Elkhorn deal
• Faroe Petroleum makes oil discovery in Norwegian Sea
• Cobham says expects revenue to decline in 2013
• Gulf Keystone eyes admission to main market by 2014
• AstraZeneca spends $190 mln on new UK cancer drug factory
• Redrow says private reservations up 52 percent
• Flybe announces further restructuring; sees 500 job cuts
• Catlin gross premiums written rise 8 pct
• Shire to buy rare disease specialist ViroPharma for $4.2 bln
• BG completes LNG supply, equity deal with CNOOC
• Admiral vehicle count rises 3 percent in third quarter
• Lonmin full-year profit beats forecasts, output ahead of plan
• Statoil makes sizeable oil discovery off Norway