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

UK 100 called to open +5pts at 6450, but only after again testing new multi-week lows overnight as Fed early taper fears on US political and jobs market progress continuing to grip both Europe and the US, with even US IPO optimism after good debuts by Hilton Worldwide and Amarak failing to inspire the broader market.

Overnight UK Index sentiment dented (perversely) by the House of Representatives passing the bipartisan budget bill by a large majority, which takes it a step closer to full approval (Senate approval required next week), removing much of the political risk that may have been holding the Fed back from tapering.

Expectations of next week’s Fed FOMC decision still very divided after US jobless claims spiked suggesting seasonality may be affecting jobs data in which case, combined with weaker inflation data, a further delay in any tapering decision may be warranted to allow early 2014 data prints to give a better picture.

Note ratings agency Fitch reiterating it will make a decision on the US’ AAA rating in the next few months while it will take the UK time to earn its back needing a fall in debt-to-GDP ratio. Moody’s said the US economy is on track for full employment in 3 years.

The UK index is, nonetheless, off its worst levels thanks to a stronger USD Index and reports of the BoJ being seen easing as early as Spring. This sent the USD/JPY to a 5yr high, just shy of 104, helping Japan’s exporters and the Nikkei end a 3-day losing streak. Japan also supported by better Industrial Production and steady capacity Use

Sentiment in Asia positive with Hong Kong and Australia also posting gains, the latter benefiting from both a rise in the USD Index and continued intensification of efforts by RBA Governor Stevens to weaken the AUD/USD back towards to the 0.85 level he has recently cited as beneficial to the economy. The AUD is back <0.90 and near August lows.

In Europe note Ireland exiting its EU-IMF bailout programme this weekend which will mark a big step for the Eurozone debt crisis, so long as the emerald isle it can stay free of the shackles it has worn since 2009, allowing it to stand equal among peers and use opportunities available.

In focus today we have Spanish CPI seen cooling in November while UK Construction Output is expected to have rebounded in October, but slowed over the past 12 months. Eurozone employment will be key although consensus lacking. US November PPI seen improving, although core slowing. Several ECB speakers out in force again.

The UK 100 is back around the 6450 level it oscillated around yesterday, after testing new lows of 6425 overnight. Correction still in motion, having accelerated and now shifting down from one falling channel and for its floor to have become the current ceiling. As we pointed to in our UK Index focus, it may well be that we need to get to 6380 long term 4.5yr rising support before we get any meaningful rebound.

In FX, the USD dollar rebound took it to 4-day high of 80.3 overnight with less political risk increasing the chances of Fed tapering next week. GBP/USD down at 1.635 from recent 1.645 highs on USD strength. Support 1.63.  EUR/USD also suffering from USD strength, back at 1.375 from recent touch of 1.38. Support 1.374.

In commodities, Gold hurt by stronger USD taking it all the way back to below the $1240 mid-point of the last 3-weeks. Support $1212 recent lows and $1270 recent highs.

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