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

UK 100 called to open -15pts this morning at 6610, with Asian equities lower (Japan back after holiday) despite a positive US close as market participants position themselves ahead of the Federal Reserve update on Wednesday from which tapering of QE3 is widely anticipated (consensus $10bn), although it could be less ($5bn) – a token gesture to maintain credibility.

Overnight, the RBA minutes from September showed still open to further rate cuts but nothing likely in near term (AUD nonetheless off worst levels after yesterday’s weakening), saying banks must remain prudent on lending and China should still grow 7.5% in H2 2013. China reported an improvement in the Conf Board Leading Econ Index although at the slowest pace in several months.

Other big news from the UK overnight is that the government has completed the placing of a 6% £3.2bn stake in Lloyds at a price of 75p, making a £61m profit after taxpayers bailed it out in 2008. The government stake falls from 38.7% to 32.7%. Watch for reaction in both LLOY and RBS this morning.

In Europe the IMF has approved a €84.7m payment to Cyprus after its first review while German Chancellor Merkel reiterates opposition to €urobonds and a debt redemption fund. IN the Middle East, French foreign minister says no doubt from UN inspectors that Syria’s Assad regime used chemical weapons. After the withdrawal of Summers, US President Obama under pressure on debt ceiling with work to do in congress.

In focus today we have UK inflation data where PPI input prices are seen cooling more than PPI output prices with production sales helped by the stronger GBP, a factor of markets pricing in earlier rate rises and ignoring BoE Governor Carney’s forward guidance. As for CPI/RPI, a rebound in August after a flat July, but the annual rate is expected to have cooled slightly albeit still well above target.

 ZEW surveys forecast improved in September and US inflation flat on the month but cooler on over the year, although core inflation cooling less so. The day closes with US NAHB Housing seen taking a small tick back from August.

 The breakout at 6600 to 6660, has seen a full retrace. All eyes on whether it can now hold as support which would could keep the breakout above falling highs from May alive. 6000 also coincides with rising lows since end-Aug. It’s all about 6000.

 In FX, USD index stuck in tight range around 81.5, still in downtrend since early Sept at 82.7 helped by Summers withdrawal from Fed chair race and in spite of likely tapering announcement tomorrow. GBP/USD slowed up just shy of 1.60. UK inflation data important today in terms of forward guidance. EUR/USD off worst levels after weakening yesterday to below 1.335.

Gold found support at $1300 helped by weaker USD after breakdown from rising channel on lack of safehaven seeking and absence of fears of inflation. $1350 now likely resistance.

Oil still under pressure over threat of imminent military strikes on Syria as US secretary of state Kerry joined French and UK diplomats in calling for the UN resolution to eliminate Assad’s arsenal and forcing him from power. US Light Crude down near 1-montgh lows of $105 although Brent Crude off its worst levels of $108.7, regaining $110.

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