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

UK 100 called to open +5pts at 6645, finding some support after a 50pt sell-off yesterday and a continuation of the month-long correction, despite a late sell-off and breakeven US finish and another mixed Asia-Pacific session – China benefiting from news of a system of deposit insurance but Japan’s Nikkei weak due to a JPY pullback and BoJ talk of paying more attention to downside risk to both growth and, more importantly, inflation.

Europe called to open positively on news that the waiting may be over for a German grand coalition with Chancellor Merkel’s CDU reaching an agreement with the SPD. Political risk also reduced by Italian PM Letta’s government surviving a vote of confidence on the 2014 budget despite Berlusconi’s party (Forza Italia) confirming their exit from the coalition.

EUR/USD has touched 1.36 on a German newspaper reporting the ECB may be considering a new LTRO with conditions attached (similar to BoE’s Funding for Lending Scheme). Note the ECB’s Asmussen again reiterating a weak, fragile and uneven eurozone recovery, but thankfully heading in the right direction.

After the US close, Hewlett-Packard gave the tech world some good news with sales and profits beating estimates and the shares +6% in extending trading. Asian political risk remains with Japan ignoring China’s new no-fly zone and downplaying a US flight by two B-52s through the disputed airspace over the East China Sea islands.

In focus today we have UK Q3 GDP expected to be confirmed at 0.8% QoQ and 1.5% YoY, while the Index of Services (78% of GDP) remains solid in September. UK CBI Reported Sales seen rebounding.

In the afternoon, a bit more US data to potentially get markets excited ahead of a quiet end to the week with Thanksgiving tomorrow. US Jobless Claims seen flattish, but Durable Goods Orders seen dropping after a strong September (ex-transport seen rebounding).

Chicago Fed Manufacturing and PMI seen giving up ground, although the Uni of Michigan Confidence is expected to show an improvement after the disappointing official US Consumer Confidence yesterday.

After flirting with 6700, the resumed its month-long correction and tested 13-day lows of of 6640 to plumb as far as 6627. The downtrend of falling highs from end-October remain unbroken. But the potential now is for a rally back from whence we came. As we said yesterday, however, should data prove uninspiring the quiet end to the week could well see us drift through the falling highs at 6695 freeing it up for a renewed up-move.

In FX, USD basket tested recent lows of 80.55 but regained 80.7 overnight. Still under pressure despite the prospect of tapering (now being ignored?). GBP/USD helped by weaker USD and still testing long-term falling highs around 1.623.

EUR/USD jumped to 1.36, a level last seen in late October, helped by weaker USD and talk of another LTRO. USD/JPY trying again for 102 thanks after a breather, helped by BoJ doubts on recovery and inflation.

Gold found support at $1240 but still with falling resistance to overcome around $1250. Some bargain hunting, but lack of safehaven demand and inflation needing hedging. A break above $1250 likely needed before renewed interest. A revisit of $1200 still possible.

Oil markets still struggling with uncertainty on Iranian deal boosting supply and a build in US stocks. US Light Crude down in doldrums around month lows of $93 while Brent Crude is sideways around month highs of $110.