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

UK 100 called to open +30pts at 6620, maintaining its bullish bias from last week and opening up the possibility of a positive close to December after a troubled pre-taper start. European bourses also called higher.

The positive call follows more post-taper gains in US equities on Friday thanks to an upward revision to Q3 GDP combined with a resilient session in Asia, despite increased concerns of a China cash crunch (short-term interbank borrowing rates remain at worrying levels despite PBOC intervention), thanks to the IMF raising its outlook for the US.

With outgoing Fed Chairman Bernanke having embarked on tapering at the end of his tenure note the US Senate voting in favour of ending the debate on the promotion of vice Chair Yellen allowing her to be confirmed on Jan 6.

Note also that Fed FOMC voter Rosengren (Boston Fed) who dissented on the taper decision last week said he agrees that the US economy is improving but would have preferred to wait until March for more data to give him more confidence.

In Europe after the EU was downgraded last week by S&P, note ratings agency Fitch affirming France’s AA+ with a stable outlook.

In terms of big corporate news, phone maker Apple (AAPL) has finally secured a deal to bring the iPhone to China Mobile, the world’s biggest network with 750m subscribers, which could potentially give it a huge sales boost.

In focus today, as might be expected before a big holiday, top-tier macro data is lacking, although with the Fed having just signalled the end of QE3, it is rather apt that the day’s big numbers come from the US.

Personal Income and Spending are both are  seen improving further in November, even accelerating and with spending still outpacing income suggesting consumer confidence which itself may be confirmed by the final December reading for the Uni of Michigan, expected to be revised a touch higher.

The UK 100 is still eking out gains from last week, adding to the late Santa Rally and taking it closer to breakeven for the month after a poor pre-taper start. Key though, after 7 weeks, is the breakout above the trendline of falling highs which opens up the possibility of further gains via a resumption of the longer-term uptrend.

In FX, the USD dollar index has fallen back from 81 to the taper-breakout level of 80.6. GBP/USD remains in the middle of its Dec breakout sideways channel 1.625-1.645, while EUR/USD is holding above 1.36 in a 5.5 month uptrend although well above support at 1.35 and well off recent highs of 1.38.

In commodities, Gold bugs will be glad to see the yellow metal having regained the $1200 below which it sank last week to almost test June lows of $1180. Nonetheless, drivers remain absent with a stronger USD denting the purchasing power of other currencies, a lack in inflation needing hedging, much reduced perceived need for a safehaven and an unfortunate lack of income. It also remains in a 14-month downtrend.

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