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

UK 100 called to open -5pts, after hawkish commentary from the US Federal Reserve’s (Fed) latest FOMC minutes indicating several members wanted to slow/stop asset purchases (QE) well before the end of 2013 which saw US markets finish marginally in the red. The benefits of the QE programme were seen as uncertain and potential costs higher than expected. Fed all out of bullets?

In terms of macro data, we had deterioration in the HSBC China Services PMI to the lowest level since August 2011 which is as odds with the improvement in the official figure yesterday. German Retail Sales have also just come out better than expectations suggesting improved consumer confidence in the Eurozone behemoth.

Asian markets mostly lower, although Japan the standout with significant gains (near Feb 2011 highs) after it reopened from holidays and reacted to the weaker JPY (still hitting new lows versus the USD), the fiscal cliff news and alignment with other open world equity markets. However the index is already off its highs on the prospect of revised QE expectations from the US which has put a dampener on global risk appetite.

In Europe, note press reports that the German Finance Minister wants to reduce the country’s budget by €6bn next year (Cameron found a friend?) to achieve a structurally balanced budget. The Wall Street Journal also suggests Spain has drained (90%) a pension fund to buy its own debt. Bullish on sovereign debt again in 2013? Missed the boat in 2012?

In focus today will be the US Non-Farm Payrolls employment figure which will be key as ever, especially with the Fed’s QE programme being explicitly linked to employment improvement, and with revised expectations following the FOMC minutes. The number also of interest after the ADP figure beat expectations by such a big margin, having been so close to NFP last month (post revisions).

In Europe, focus will remain on the PMI data (Services today) after the mixed bag from Manufacturing – could the UK surprise again? Before the close, US Factory Orders and US ISM Non-Manufacturing are expected to show growth, but both less than the prior month.

We asked whether the UK 100 could hold above 6000 yesterday, having broken above a trendline of rising highs, and it has. While risk appetite may have waned, the index now has support around 6015 and then again at the magic 6000. We can still look to mid-crisis highs of 6100/6130 from April 2011 as the next target and resistance.

In FX, GBP/USD off its highs of near 1.64 as revised expectations for QE from the Fed saw the greenback shunned and the pair trade early December lows around 1.605. With the 3.5yr trendline of falling resistance just above 1.64 almost being brought into play, are we now to look to prior major lows at 1.533? EUR/USD back down at trendline of rising support at 1.30 having fallen back from 8-month highs at 1.33. GBP/EUR slowed up at 1.235 maintaining the trend of falling highs from mid-July. Prior low of downtrend was at 1.216.

In Commodities, Gold tried higher yesterday but the stronger USD has seen it turn about to retest the trendline of rising support at $1645 from mid-May. Resistance at falling highs from late November at $1690. Oils also continue to come back from their highs with US Light Crude close to testing $92, after hitting highs of near $94 and Brent Crude now sub 111.5 after highs of near $113.

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Overnight Macro Data: (Source: Reuters/DJ Newswires)

• China               Non-HSBC Services PMI          Deteriorated
• Germany         Retail Sales                             Better
• See Live Macro calendar for all details

UK Company Headlines: (Source: Reuters/DJ Newswires)

• Marshalls annual revenue slips 7 percent
• Hornby names Nick Stone finance director
• Johnson Service says results to hit forecasts
• Costain finished the yr in line with expectations
• Rolls Royce-wins $52.2 mln engine contract from US Marine Corps
• Balfour Beatty wins 150 mln stg highways contract
• Subsea 7 wins $300 mln contract from Dana Petroleum
• Clarkson says trading in line with expectations
• Anglo American sells Amapa stake to Zamin Ferrous