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

UK 100 Index called to open +75pts at 6530, after US equities closed higher boosted by stronger than expected advance US Q3 GDP and a continued run of positive stateside corporate earnings reports and weak German inflation which just went to add to speculation of more help from the ECB to help the struggling region and the Bank of Japan elected to open the stimulus taps a touch more.

The UK 100 is now comfortably back above 6400 leading us to believe that completion of the bullish Inverse Head & Shoulders reversal we have been discussing (neckline 6400; target 6730) will come to fruition. Watch levels: bullish 6600, bearish 6475. A wide range I know, but big progress by futures prices over last 12 hours.

While US GDP beat and Eurozone confidence Surveys were in-line to better, US jobless claims were just shy of expectations as was US GDP inflation and consumption/expenditure which slowed more than expected. On the whole the data was seen to support the Fed’s end to QE and ‘slightly more’ hawkish rhetoric, giving confidence that the US can live without such stimulus and is ready for an eventual rate rise. Whenever that may come. The debate will rage on. The USD rallied accordingly.

In Europe, the ECB has begun hiring banks to help with its ABS (Asset Backed Security) purchases, its next stimulus step which should start next month, however a recent think tank report said the recent strong USD and stabilisation in inflation expectations has reduced pressure on ECB to expand stimulus further. Really?

Asian stocks higher overnight with Japan’s Nikkei the standout performer, up nearly 5% on the stronger USD and weaker JPY helping exporter equities and the BoJ shock move to ease monetary policy more by expanding its monetary base further (JPY weakened even further). Coupled with earlier talk of the GFIP government pension fund doubling its domestic/foreign stock allocation the Nikkei was off to the races.

Data-wise overnight, the Japanese headline CPI dropped a touch (ex-food stable, ex-food & energy up), while household spending deteriorated further. The GFK UK Consumer Confidence dipped but stays high, consistent with a strong economy, while Aussie Producer Price inflation was mixed (monthly rebound, annual slowdown) but Private Sector Credit continued to expand.

Japanese Housing Starts weren’t as weak as expected but Construction Orders plunged and unemployment ticked back up as expected. Lastly, German Retail Sales dropped in September (most in 7 yrs, too warm? Consumers les confident?) but annual growth accelerated.

In focus today we have Eurozone Unemployment seen stable (still too high) while CPI is expected to nudge higher, although maybe not after Germany’s weak readings yesterday. After the positive US data yesterday, US Personal Income and Spending will be looked for signs of confidence to along with inflation pressure. Any? The Chicago PMI is seen flat and the Uni of Michigan Confidence forecast to confirm the positive prelim climb.

In commodities, Gold has sunk further, headed for its first consecutive monthly loss in 2014 as the Fed ended QE and signs of an improving US economy delivered the double whammy of strengthening the USD, making the metal more expensive, and equity markets rallying, reducing the apparent need for a safehaven. Note Silver dropping back to its lowest price since February 2010

Oil given up more ground, looking set for its biggest monthly drop since 2012, amid signs that OPEC boosted output to a 14-month high even as crude slumped into a bear market (both WTI and Brent down >20% from June highs) likely reducing muted inflation pressures further, negating need for inflation hedges like Gold.

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