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

UK 100 called to open +10pts at 6550 despite a negative US close on caution ahead of much US macro data and especially Friday’s US Non-Farm Payrolls (NFP) which will, as always, serve as a marker for timing on the Fed’s potential tapering of QE3.

The Fed’s Williams said he expects QE3 to end next year and would be disappointed if still in place this time next year. Echoing the Fed message that tapering ≠ tightening, he said rates should say near zero until late 2015. Note strong US car sales data in November (strongest since 2007).

In Europe, the Italian economy minister assured that the chances of a break-up of the Eurozone are now zero while the Italian government won a confidence vote on a decree in the lower house.

Overnight, Asian markets mixed with Japan’s Nikkei suffering from continued profit-taking (although off its worst levels) and on JPY strength following a BoJ member dousing speculation of more easing ahead of April’s sales tax hike while PM Abe reportedly readying a stimulus package.

Australia’s ASX positive helped by a weaker AUD after a weak Q3 GDP (and revised lower Q2) print suggesting the economy slowing to below-trend after years of resources investment (note RIO cutting CAPEX yesterday) and China’s HSBC PMI Services ticking down although stocks in Shanghai hit six month highs helped by Moody’s giving the banking sector a stable outlook despite investor scepticism (WSJ) on non-performing loans.

In focus today we have final readings for Eurozone PMI Services where France still seen under pressure versus Germany but the region holding up above 50. Eurozone GDP reading (flash Q3) is seen remaining weak but Retail sales should have recovered to flat growth after a negative September.

In the afternoon, US ADP Employment (often considered an NFP warm-up) is seen delivering 170K jobs adds after the prior month’s 130K.  ISM Non-Manufacturing is expected to have ticked back a notch while US New Home Sales see September and October released jointly due to the US government shutdown.

Note an FT article pointing to European antitrust regulators preparing to unleash record breaking fines on global banks for the rate rigging scandal, while the Wall St Journal reports that US regulators are set to approve toughened Volcker Rule starting an ear of stricter oversight with restrictions on proprietary trading.

The UK 100 is back off its worst levels of yesterday evening near the key 6500 level which we had suggested as potential support having been a pivotal level since as far back as April. This takes the correction from end-October to 4.6% in 5 weeks, and while there is upside to the ceiling of the falling channel at 6650, a break of this trendline would still be required before an end to the correction can be called. As we asked yesterday, could NFP help or hinder?

In FX, the USD dollar index is again off its recent lows of 80.5 having fallen from 81.0 overnight yesterday. GBP/USD slowed up around recent highs 1.64 while EUR/USD has fallen back from 1.36 on the stronger USD.

In commodities, Gold still pressured by stronger USD and likely lack of safehaven interest until the yellow metal bottoms at either the long term rising trendline around $1200 or indeed the end-June low of $1180.

In Oils, the price of US Light Crude extended its gains for the fourth day to $97.4/barrel after the American Petroleum Institute said US oil supplies dropped by 12.4m barrels last week, the first decline since September. Note EIA data out this afternoon expecting a stockpile drop. Brent Crude has maintained uptrend to hit $113.

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