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

UK 100 called to open -5pts, with Asian markets mixed following the US Federal Reserve’s (Fed) expected FOMC announcement last night of more stimulus (QE4) worth $45bn per month in long term treasury bond purchases to offset the expiration of Operation Twist, on top of the exiting $40bn monthly purchases of mortgage backed securities (MBS).

Risk appetite tempered despite an explicit tying of interest rate policy to unemployment and inflation expectations increasing market transparency – rates to stay exceptionally are low until unemployment falls to 6.5% and as long as inflation expectations stay below 2.5%, replacing calendar guidance with outcome guidance – after comments that Fed could not offset a fall off the fiscal cliff which is already denting consumer sentiment.

In Asia, the Nikkei has rallied and the Japanese Yen (JPY) come under more pressure ahead of the national election at the weekend where the likely winner is seen pushing for further policy stimulus.

Other Asia-Pacific markets in the red after US markets gave up their initial gains after New Zealand’s manufacturing disappointed, although consumer confidence rose, while Australian consumer inflation expectations fell back to below the RBA’s target range, but motor vehicle sales maintained near double-digit growth.

Back in Europe, progress looks to have been made in Brussels overnight with EU finance ministers agreeing to allow the ECB to supervise the 150-200 banks with assets >€30bn (France had wanted all, Germany had wanted only big banks). This potentially clears another hurdle in this financial turned sovereign debt crisis and sees the UK maintain safeguards. The supervisory role could be active early-2014, and the ESM (new bailout fund, available to recapitalise banks) within a similar timeframe.

With Eurozone politics providing for more worry this week on news that Berlusconi wanted back in to Rome, and planned to quash the austerity plans, it has emerged  he will withdraw his candidacy if Monti leads a centrist coalition. Today may also see Greece begin receiving its next tranche(s) of bailout aid from the Eurogroup meeting this morning and it will be of interest to see what comments emerge after the debt buyback failed to reduce the nation’s expected deficit-to-GDP ratio by as much as was hoped. Moving goalposts?

The Fiscal Cliff toing and froing continues (making me dizzy) with the House Speaker stating that Obama was being unreasonable and that progress on Capitol Hill was lacking. With Bernanke’s comments downbeat FOMC comments on his ability to help, the UK 100 came back off 9-month highs although it remains in its shallow Santa Rally uptrend with support potential at the level of recently broken highs around 5930. On wards and upwards, or is the Bernanke bullet all we are going to get before Christmas.

Today’s focus will be on UK CBI Industrial Trends where expectations are foran improvement in ordersbut stagnation in selling prices, highlighting the productivity gap which is evident in the employment vs. GDP figures the UK is printing. In the afternoon, all eyes stateside again with US Retail Sales seen growing tepidly. Jobless Claims likely to show much change, although the obligatory upward revision to last week will suggest progress on the weak.

In FX, GBP/USD rallied on the back of the FOMC announcement (more QE means weaker USD) regaining early November highs of 1.617. Support possible around 1.61. EUR/USD also rallied, on a combination of the Fed news and Eurozone progress (banking supervisory, Greece bailout). Resistance possible again at 1.31, otherwise Early December highs of 1.312. Support possible at 1.305. GBP/EUR weekend back from 1.245 on prospect of more QE from BoE (incoming governor’s statement) and Eurozone progress. Support possible around 1.23.

In commodities, Gold fallen back after its initial Bernanke-fuelled rally to $1725 to trade below $1700 again. This despite the USD remaining weak. Support possible at early month lows of $1685. In Oil, US Light Crude followed similar path to Gold, falling back from rally high of $87.5 but remains in short-term rising trend with support around $86. Brent Crude fallen back from highs of 110.5 after the Fed announcement and OPEC maintaining its production quotas. Support kicked in at $109.

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.

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

• Aussie              New Motor Sales                                Growth Improved
• Aussie              Consumer Inflation Expectations        Declined
• See Live Macro calendar for all details

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

• BAE wins $400m deal for U.S. Navy aircraft
• HMV says likely to breach covenant in Jan, in bank talks
• Sports Direct first-half profit +17%
• Centamin suspends operations at Sukari mine
• John Wood sees losses on Oman contract reducing
• Betfair to focus on regulated markets
• National Express says on target for year
• PV Crystalox Solar to restructure, facing loss
• Ultra Electronics signs MoU on British nuclear reactors
• BG Group names industry veteran Finlayson as CEO
• AstraZeneca says fostamatinib did not meet study goal
• Morrisons appoints Trevor Strain as finance director