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

  UK 100 called to open -20pts at 6545, despite a positive US close and another S&P500 record on the prospect of a small taper in December after lots of Fed speakers got their ‘taper tuppence’ in before the FOMC black-out period ahead of next week’s meeting.

 Asian equities failed to take the positive baton from the US, with small losses overnight on profit taking and Japanese industrial data and consumer confidence disappointing before China data came in largely in-line but showed slowing/moderating of strong growth. Nikkei flat around 15,600 despite weaker JPY (back >103.3)

 The Fed’s Lacker said he expected taper discussions next week. Bullard said the odds of it have risen after the strong NFP report, and suggests a small taper to recognise jobs improvement but inflation to be monitored. Fischer said costs of QE3 outweighing benefits and that tapering should start now with a clear calendar.

 BoE Governor Carney was also speaking – dovishly – in New York and said that the UK’s monetary policy is gaining traction with sustainable growth returning but rates will not get back to historic norm any time soon. He favours other tools to control recovery and prevent housing bubble. Note UK RICS house prices rose to a 14-year high.

 In Europe, France and Germany could be closer to a deal on a banking union to monitor and wind up failing institutions  avoiding public money or resolution finding with differences narrowing on the issues surrounding a central rescue fund versus a network of national funds and a hybrid scheme of  national schemes under an umbrella suggested.

 The ECB’s Mersch said the buying government bonds in an attempt to stimulate the eurozone would involve major challenges and warned that negative deposit rates for banks parking money at the central bank could raise borrowing costs for the economy.

 In focus today we have UK Industrial and Manufacturing Production seen slowing in October but having accelerated over the last 12 months. The UK’s Trade Balance also seen falling. US small business optimism seen rising while Wholesale Sales and Inventories  growth likely cooled. The update on the NIESR UK GDP estimate will be eyed for any improvement.

 The UK 100 rebound failed to add anything yesterday, struggling to challenge the overnight highs. Back below the 6550 level, we are still a way off the scrooge 6610 scupper level of falling highs from end-October around 6630.

 In FX, the USD dollar has weakened back to nearly touch 80.0, suggesting December taper odds greatly reduced. Downtrend acceleration since 3 Dec. GBP/USD above 1.64 on dovish Carney speech. EUR/USD trading 1.375, back in uptrend thanks to USD pre-December FOMC meeting weakening as well as no new ECB weakening measures. When will ECB get worried about FX? At 1.40?

 In commodities, Gold back above $1240 thanks to weaker USD. Close to trendline of shallow falling highs at $1250. Breakout on continued USD weakness? Or another trip south to test support at $1215.

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