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

  UK 100 called to open -20pts at 6675, despite incoming Fed Chair Yellen defending bond purchases in a letter to a US senator and reiterating that QE3 benefits outweigh costs and that inflation/unemployment thresholds and benchmarks and not triggers for a rate rise.

 Fed member Charles Evans agreed and supports a drop in the unemployment threshold and comments from current Fed Chair Bernanke helped to reinforce expectations of a delay in tapering until the New Year with very dovish comments saying the FOMC can afford to be patient with interest rates even after the unemployment <6.5%. Unfortunately, index futures failed to make hay, possibly awaiting FOMC minutes tonight.

 With so much talk about triggers and patience, they wouldn’t be gearing us up for a December taper would they – trying to offset the bad news with clarity about rate rises still being a long way off yet? Markets, wouldn’t take to it kindly – data still murky, and the messages still mixed from the Fed – all part of the master plan to keep markets in check.

 In Asia overnight, equities mixed with China and Hong Kong still buoyed by mainland reforms (talk of relaxing of FX controls and financial markets). Japan’ Nikkei in the red, with ore profit taking, despite the USD/JPY weakening back above 100 after a surprise surge in both exports and imports (suggest domestic growth rebound and weak JPY helping foreign sales) saw the trade gap widen.

 Other data saw China’s MNI Business Indicator give up some ground but the Conference Board Leading Economic Index continue to push higher. Japan’s Industrial Activity met expectations of an acceleration in growth, however German Producer Price Inflation fell for the third month, more data to justify the ECB rate cut to counter falling regional inflation.

 In focus today, in terms of macro data, we have US Retail Sales seen reversing from the negative September despite the Government shutdown in October. CPI seen flat and slowing on an annual basis, thus benign, although core CPI seen stable. US Home Sales seen weakening in October, although Business Inventories growing as fast as in August.

 Away from data, it’s all about the central banks (no change there) with the BoE minutes from the October MPC being published, which will be important after the quarterly inflation report delivered so many upward revisions to growth and potential changes to rate rise timing. Any news on changing the unemployment threshold? How markets digest the minutes will likely impact GBP/USD.

 More Fed speakers today to keep things murky, before Fed FOMC minutes tonight when markets may gain more (or less) clarity on latest thinking in terms of policy and direction at the world’s most significant central bank.

 The UK 100 failed at 6,710 yesterday, which was below the key 6,720 falling last-October highs that we had been eying as having breakout potential to revive the uptrend. Now firmly back below 6,700, we must assume this correction persists. Downside to 6,610 mid-Nov lows. Resistance 6,170 and 6,720.

In FX, USD basket weakened but only as far as 80.6 after the dovish Fed comments. Rebound since, so support 80.6 and resistance 80.87 high yesterday. Fed speakers and FOMC minutes to be the drivers, although inflation data could have a bearing.

 GBP/USD holding sideways 1.61-1.615 thanks to weaker USD. Note 1-month highs and major falling resistance still at 1.625. EUR/USD maintains 11-day uptrend nearly testing 1.358 yesterday. USD/JPY regained 100 after trade gap data.

 Gold still under pressure with falling late-October highs at $1280 a hurdle. Weaker USD on dovish Fed talk no help with benign inflation, no income and lack of safehaven demand (central banks to the rescue).

 For any help you may require placing trades or in terms of market information, put a call in to our trading floor – all part of the service.