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

  UK 100 called to open +15pts at 6510, still hanging around 6500 after US equities followed Europe to close in the red – although with much smaller losses – with newsflow light and sentiment uncertainty driven by a combination of light pre-holiday volumes and reticence to place bets on the Fed policy decision (taper/no taper?) this evening.

 Recent US data has gone to confound policy change expectations with better jobs data and GDP seeing expectations of QE3 tapering rise, only to be countered by low inflation (more evidence yesterday) and stockbuilding which may normalise. Updates on economic projections will be very important this evening.

 Consensus looks weighted towards the Fed waiting until early next year but delivering stronger hints as to actual timing. However, don’t forget how markets built up to expectations and were ultimately surprised by a taper no-show last September. Note also Republicans threatening to delay Fed Chair replacement Yellen’s nomination.

 Asian stocks mixed overnight with Japan’s Nikkei benefiting from the USD/JPY getting back up to the 103 level after trade data showed continued deficits with strong exports growth still being outpaced by imports, widening the trade gap, with the weaker JPY benefit to exports offset by more expensive imports.

 While all eyes on the US, data from China overnight was largely positive with a rise in the MNI Business Indicator, Foreign Direct Investment and Leading economic Index. On the flip side, further acceleration in property prices may increase concerns and expectations of the need to cool the market.

 In Europe, the big news is an overnight agreement on a common backstop (to be defined) for a fund (network of national funds financed by bank levies) designed to help wind down troubled banks in the region and avoid another contagion-driven financial crisis. More details to come, but the backstop would allow the system to borrow money if it ever did run out of cash, rather than put taxpayers on the hook.

 In focus today we have, of course the main event, the Fed update this evening, however, before that there is an update on German IFO surveys which as usual are seen rising slightly, although consensus could be conservative given the jump in ZEW readings yesterday.

 UK Unemployment is expected to remain at 7.6% although with further improvements in claims and claimant count and another solid reading in terms of jobs added over the last 3 months. UK CBI Sales data seen jumping in December. BoE minutes will be of interest for anything extra in terms of outlook and details on forward guidance.

 In the afternoon as US November Housing Starts are forecast to be pretty much the same as in October, but Building Permits are seen falling back below 1. Then it’s the big one. Will the Fed change its extraordinary stimulus policy and reduce its monthly asset purchases (QE3).

 The UK 100 remains around 6500 and looks to want to push higher, however, falling highs from 8 Dec holding things back and conviction is likely to be lacking until the Fed decision is released this evening. The index is still ultimately in a downtrend from October that is yet to be reversed. Support 6480 from yesterday’s lows, with resistance at Monday’s 6535 highs.

 In FX, the USD dollar index is holding around 80.2 ahead of the FOMC meeting. GBP/USD found support at intersecting trendline at 1.6225 after inflation data fell even closer to the BoE’s target and could reduce the threat of a rate hike as early the bank is suggesting based on unemployment improvements. EUR/USD still up around recent 1.38 highs benefiting from big early LTRO repayments by banks.

 In commodities, Gold still in a $1220-50 holding pattern, a bit like the USD index awaiting the fed update.

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