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

UK 100 called to open +20pts at 6510, regaining the 6,500 level overnight but still with yesterday’s highs of 6,520 to beat. As we have said all week, the correction persists.

After a negative US close thanks to yet more positive US macro data fuelling taper concerns (upward revision to Q3 GDP), equities in Asia mixed as caution prevents risk taking ahead of the all-important US Non-Farm payrolls, which investors await to gauge the timing of the Fed’s slowing in QE3 asset purchases.

Japan’s Nikkei benefiting from a weaker JPY (USD/JPY back >102) helping exporters while and with improvements in sentiment indices. Australia’s ASX in the red despite the AIG construction index creeping up, after Qantas was downgraded by S&P to Junk despite a Stable outlook following this week’s profits warning. Peer Moody’s says may do the same.

Overnight, following the less-than-exciting UK Autumn budget statement (which will be remembered more for shadow Chancellor Ed Balls almost blowing a gasket, than improvements in growth and borrowing forecasts, Moody’s pointed to the UK’s improved macro prospects which it suggests are credit positive but that ongoing challenges are reflected in the sub-AAA rating.

With the US political/budget issue having gone quiet but still potentially dangerous, House members Ryan and Murray say a budget deal could be closer while Congressional sources say negotiations are aimed at putting the finishing touches on a deal to avoid another shutdown next month. The Fed’s Fisher says unemployment still not good enough for tapering while Lockhart wants a clear timetable once tapering starts.

In Europe, sentiment held back by the ECB staying dovish, talking down the chance of a new LTRO, and actually questioning the effectiveness of the last 3, has led to more speculation about negative deposit rates for banks parking money at the central bank and other measures to help the region. EUR benefited versus USD.

In focus today it’s all about the US employment report with expectations for net job additions of 185K in November, down from the surprise 204K last month. However, after a very strong November ADP figure on Wednesday, and a big upward revision for October, there is potential for an upside surprise (November, or October revision) which could intensify current taper fears. Unemployment rate see falling again, but watch the participation rate. To close the week, US Uni of Michigan Consumer Confidence is seen rising in December.

After another positive GDP revision for the US, flattered by an acceleration in inventory build, we are even more confident that QE3 tapering will be delivered in Q1 (post Yellen’s arrival) rather than this month as the Fed will want to see that underlying GDP growth (ex-inventory build) is improving – as jobs appear to be – rather than slowing up since Q2 (down from 2.1% in Q2, to 2% at 1^st Q3 est and 1.9% at 2^nd Q3 est).

With concerns of divergence of growth and disinflation in Europe, German Factory orders will be looked to late morning with expectations for a weak October after the strong September. UK/GBP followers will also get an update on the BoE/GFK Inflation expectations for the next 12 months which could influence rate-rise expectations.

Sideways UK 100 move around 6500 offers potential for a bottom to have been found, but without a break above 6520, the correction is still in motion. Note the daily chart showing rising support for momentum which would coincide with the rising price support of the past 5 months.

In FX, the USD dollar back off its lows of 80.25 to regain 80.4 ahead of today’s jobs and taper timing update. GBP/USD back down at 1.63 at the trendline of highs since April 2012 recently broken above. Support? EUR/USD jumped to test 1.367 on no new measures from the ECB.

In commodities, Gold volatile yesterday on US data and USD moves. Back above $1230 with support at recent lows $1210 and resistance at intersecting trendline around $1250.

For any help you may require placing trades or in terms of market information, put a call in to our trading floor – all part of the service.