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

UK 100 called to open -5pts after US markets closed higher with investors looking to today’s Federal Reserve (Fed) rate decision and increasing speculation that additional support could be announced by it and major central banks. Will the Fed talk of  (more QE? Extension of operation twist? Something else? Nothing?).

Sentiment boosted by talk (quickly denied, therefore very possible) that Germany poised to permit direct purchases of sovereign debt by Europe’s rescue funds (EFSF, ESM). This after France stated that before any deeper eurozone integration, crisis measures must be agreed on, and fast.

Overnight in Asia, markets also higher, taking US lead, on central bank stimulus (Fed & others) stimulus hopes and fallout from the G20 meeting in Mexico. The final communique from the G20 leaders was pretty much unchanged from drafts, pledging to take “all necessary policy measures”. We’ve heard that one before (copy and paste from last meeting?). The head of the IMF was upbeat saying seeds of pan-Euro recovery were planted in G20. The risk is that those seeds grow in Mexico and not back in Europe.

Other politicians pointed to European leaders’ own EU summit at the end of the month (their finance ministers meet this Friday) as critical for short-term measures to support financial systems. What about the long-term.  That’s the news that markets will really get excited and likely rally on.

News expected very soon on Greece’s coalition. Spain and Italy’s bond yields (6 & 7%) still too high (unacceptable in the eyes of French President Hollande, who may be suggesting that he can’t afford for his country’s to get that high).

While the Fed will be looked to this evening for news on stimulus, so will the voting of the Bank of England’s (BoE) recent Monetary Policy Committee (MPC) meeting. If voting has shifted even more than expected it may bring forward expectations for additional stimulus on this side of the pond. After yesterday’s lower inflation figures, commentary also very important.

Looking to FX and commodities, USD weaker overnight versus GBP and EUR on prospect of more stimulus (dollar printing by Fed). Gold suck in range, with falling resistance a hurdle. Oils also in $82-85 range for US light crude and $96-98 for Brent.

Macro data likely focused on Bank of England minutes and Unemployment, while a German 2yr debt auction could attract interest.

Overnight Macro Data: (Source: Reuters/DJ Newswires)

• Japan               Merchands Trade Balance     Worse than consensus
• Japan               Merchands Imports/Exports   Better than consensus
• Japan               Industrial Activity                    In-line
• Germany         Producer Prices Inflation        Worse than consensus
• See Live Macro calendar for all details

UK Company Headlines: (Source: Reuters/DJ Newswires)

• Rio Tinto approves $3.7b Australia iron ore expansion
• Sage enters Brazil with Folhamatic acquisition
• Kesa year profit -42%
• Cluff Gold says finds more gold to west of Yaoure pit
• Pendragon online visitor numbers up strongly

Morning Press Selection:

• G20 bid to cut cost of euro borrowing – FT.com – EU Economy http://on.ft.com/Mnbjvz
• Poor global growth pushes down UK inflation – FT.com – UK Economy http://on.ft.com/N3u6Jz
• US upbeat after eurozone debt crisis talks – FT.com – World http://on.ft.com/MehRub
• EU policies lead to chaotic resolution – FT.com – Capital Markets http://on.ft.com/Mczwmf
• Banks wrestle with tough funding options – FT.com – Capital Markets http://on.ft.com/MbMyTJ
• I come to praise Ms Merkel not to bury her – FT.com – Opinion http://on.ft.com/LxH3jr