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Asian stocks were in decline overnight following a dreary US performance on Wall Street and ahead of a key US jobs report tomorrow. Figures from China showed that consumer prices rose less than expected and whilst Japanese consumer sentiment worsened in December.  The markets were expecting a 2.7% in Chinese CPI yet prices only rose 2.5% in December. However, all is not lost as a worse figure could ease market fears of monetary policy tightening in China. 

The US dollar touched a four-month high as signs of improvement in the labour market supported expectations the US economy will be strong enough to support a reduction in the Federal Reserve’s bond purchases. Further job data, in the form of unemployment claims, will shed further light on how well the economy is performing. We are forecasting an unchanged reading of 337,000 claims before the all-important Non-farm payrolls tomorrow. 

No doubt investors will be focusing on the UK retail market after Tesco, Morrison’s and Marks & Spencer reported Christmas trading reports, with all three showing signs that Christmas remained tough. Tesco, the world’s third biggest retailer, posted a heavy drop in underlying sales in its main British market during the Christmas period. They reported a 2.4 percent drop in sales (excluding fuel and VAT sales tax) for the six weeks to January 4th.

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