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

UK 100 called to open +5pts at 6675, after another positive performance from both the US and Asian equity sessions after Fed Chairwoman-elect Janet Yellen supported her pre-released text with a robust testimony before the Senate Banking committee in defending the Fed’s policies and stating that she doesn’t see tapering of QE3 for a good while yet with benefits exceeding costs for now and early withdrawal a big risk amid a fragile recovery.

Japan’s Nikkei again the outperformer (>15,000) thanks to a weaker JPY (USD/JPY >100) as officials signal they are prepared to fight to keep currency weak. Expectations and optimism about the release of some much-desired additional details on Chinese economic reforms next week also got markets excited helping China and Hong Kong muster good gains.

In focus today we have the final readings for Eurozone Consumer Price Inflation (CPI) which is expected to confirm in deflation territory supporting the case for the rate cut, and maybe even additional measures in due course. The ECB’s Liikanen & Mersch also speak and markets will look for more comments on policy outlook and divides in the board ranks.

EU Finance Ministers meet today to discuss a compromise on bank wind-downs, but Germany potentially still scuppering things due to increasing legal questions, and its outgoing government lacking decision-making powers. Ireland and Spain wanting to exit cleanly, the former without a precautionary credit line. Too optimistic after weak regional growth of late?

In the US, the Empire State manufacturing index is seen improving markedly, while Import Prices are and expected to have rebounded in October (but deflated over the year). US Industrial Production growth seen slowing, but Manufacturing accelerating. Wholesale Inventories expected to show continued increase.

UK 100 failed to break back above 6700 yesterday despite dovish comments from Janet Yellen. Still in downtrend from end-October. Falling 1-week resistance at 6680, Support at recent lows 6610.

In FX, USD basket flat around 81.0. GBP/USD looking for another test of 1.61 resistance, but note major falling resistance at 1.625. EUR/USD flat around 1.345. USD/JPY broken above 100 and out of multi-month symmetrical triangle consolidation pattern.

Gold rebounded to $1295 yesterday on weaker USD, but fallen back below $1290. Off its worst levels of $1260 recently and with resistance from end-October around $1300. Perked up, thanks to dovish talk but inflation still nothing than needs hedging and safehaven demand lacking.

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