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

  UK 100 called to open +15pts at 6790, after US markets closed modestly higher although the DOW and S&P at new record highs after another bout of soft economic data (retail sales, consumer confidence, producer prices, housing still bubbling) supporting the view that tonight’s FOMC statement will see tapering pushed out until 2014.

 IBM results saw sales drop for the sixth straight quarter and its hardware unit report a loss although shares jumped on dividend declaration and news of its buyback programme being boosted by $15bn. LinkedIn also reported, beating expectations, but a conservative outlook for Q4 put paid to the shares recent strong run. Interesting, ahead of the Twitter’s IPO.

 In Asia overnight, stocks remain bid after positive US close and in anticipation of a dovish FOMC update, with Japan’s Nikkei benefiting from strong macro data and a weaker JPY  (USD/JPY back above 98) while China has rebounded on energy companies profits despite money markets remaining stressed.

 In focus today is the Fed’s FOMC update and markets expecting it to say data still too soft and effects of government shutdown mean it prefers to wait until things improve to taper its QE3 programme. We’ve always seen it as an exercise of expectations management and with US bourses trading all-time highs we expect any talk of taper timing to be cloudy in an effort to keep a lid on markets over-exuberance.

 Other events of the day include Spanish GDP, German Unemployment, the UK’s Lloyds Business barometer and Eurozone confidence prints with improvements expected across the board. Can more positive data on Europe and a dovish FOMC help EUR/USD even higher? ECB’s Nowotny already said the single currency bank unlikely to cut rates further.

 In the afternoon, ADP employment (NFP pre-cursor) seen dropping in October after government shutdown, while US Consumer Inflation in September improving on the month but remaining well below target over the year, but core unchanged. German consumer inflation unchanged.

 Results out this morning show Barclays profits -26% in Q3 from Q3 2012 after earnings at its investment bank more than halved due to a slowdown in capital markets. Underlying pre-tax profit of £1.4bn for Q3, was down from £1.9bn a year ago but above consensus £1.25bn. Next now expects a 2013-14 pre-tax profit of £650-680m up from £635-675m (consensus £663m) after sales rose 4.3% in the 13 weeks to Oct. 26.

The UK 100 maintains its northerly course almost testing 6800 overnight and the interesting trendline from June lows that we have been flagging for the past week. If this is bettered, it opens up upside to May high of 6875 which is just shy of all-time high 6935. Could the Fed message help with clarity on delayed tapering, or hinder with a cloudy message to avoid stateside over-exuberance.

 In FX, USD basket rallied to 79.7 despite expectations of delayed Fed tapering. GBP/USD back down near 1.60 on USD strength. Big resistance via falling highs from Aug 2009 held strong. EUR/USD also fallen back below 1.375 on USD strength. All eyes on the USD component and the Fed statement.

Gold holding around $1345 after recent weakness from 7-month trendlines and on stronger USD. Oils also pulled back from recent bounce on stronger USD and despite supply issues, with Brent back below $109 and US Light sub-$98.Brent could be a pause before renewed uptrend. Bullish flag pattern? Upside to recent October highs?

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