Financial markets advanced on Monday amid good news from Italy. The MSCI Asia Pacific Index climbed more than +1%. In the commodity sector, oil prices rallied with the front-month WTI contract approaching 100 while the equivalent Brent crude contract firming above 115. Gold also approaches 1800. Despite the light calendar, Japan's delivery of pleasant surprise in economic growth also supported the market.

There is more clarity in the political situation in Italy. President Giorgio Napolitano has mandated Mario Monti, former European Union competition commissioner, to form a new government in Italy. This should be a positive for the market. However, uncertainty remains with the next challenge being the government's implementation of structural reforms as well as introduction of a new tax policy.

Japanese economy has shown signs of picking up. The preliminary GDP growth for 3Q11 rose +1.5% as driven by strong growth in exports and improvement in consumer spending. Moreover, industrial production contracted -3.3% m/m in September, revised from -4.0% initially projected.

Concerning macroeconomic events for this week, the BOE will release the quarterly inflation report which will probably show inflation falling below +2% in 2 years. Policymakers should have a more dovish view than 3 months ago and may send a signal that the central bank may expand its asset purchase program further. The BoJ meeting will be held on Wednesday but we expect no change on monetary policies. The RBA will release minutes for the November meeting.