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

UK 100 called to open -25pts at 6695, following the US and Asia lower, after US markets saw a turnaround from new record intraday highs following comments from activist investor Carl Icahn who said he was cautious on stocks and the market could see a big drop.

Fed speak was as mixed as ever with FOMC voter Dudley dovishly arguing not enough momentum for confidence in labour market with inflation and unemployment where they are, even if he is more hopeful of economic strengthening, while and 2014 voter Plosser maintained his more hawkish stance that the Fed should begin tapering QE3 with little evidence that more purchases will help.

In Asia, major bourses in the red/treading water again, mirroring the US, with RBA minutes not as dovish as expected and so the ASX 200 underperforming; not ruling out another rate cut but evidence of existing cuts helping already. Japan also hindered by stronger JPY (USD/JPY<100) as well as some profit taking since the Nikkei broke above 15,000.

China also showing losses after the strong gains of late on reform hopes after comments from the Commerce Ministry said exports struggling with Yuan rise and profits being squeezed. China Foreign Direct Investment also slowed markedly versus expectations of an acceleration.

Other overnight data included an improvement in Aussie Conference Board Leading Index and a mixed albeit still buoyant readings from the Japanese Leading and Coincident Indices although Nationwide Department Store Sales dropped. In Europe, EU New Car registrations showed continued growth although at a slower pace.

In focus today, we have another light macro calendar with the highlight being German ZEW Sentiment Surveys which are expected to show improvements in November. Thereafter, it’s all about the Central bank speakers with the ECB dominating the morning but the afternoon/evening belongs to the US with Fed speakers and Obama.

The UK 100 failed again at the trendline of falling highs from end-October at 6730. Nonetheless, we note that support emerged near the trendline of rising lows from 13 Nov at 6690. We still need 6695 to hold and a break above 6725 before the uptrend can resume. Note momentum on daily chart did bounce, but yet to regain breakeven/positive.

In FX, USD basket maintained its pull-back to test 80.6 before it bounced back to 80.8 and weakened again to 80.7, on dovish commentary and economic uncertainty tempering expectations of imminent tapering. The fear of tighter financial market conditions may be enough to hold the FOMC off until Yellen jumps seats.

GBP/USD holding 1.61 thanks to weaker USD. Note 1-month highs and major falling resistance at 1.625. EUR/USD still in 10-day uptrend holding 1.35. USD/JPY still taking a breather from 100 on weaker USD, with weakness taking it close to 6-month trendline of falling highs it only just broke out from. Will it revert to support?

Gold bouncing around $1270 since the European close, still hindered by falling highs from end-October (now at $1280) and despite the weaker USD.  Still potential for a revisit of $1260 lows, given downward pressure from technicals, dovish talk, inflation not requiring hedging and lack of safehaven demand.

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