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

UK 100 Index called to open +60pts at 5935, having rebounded overnight from a very weak close and test of 3-month lows. The bounce, however, is only as far as allowing us to retest the same trendline of falling resistance from 3 Dec that hindered us yesterday at 6000, but this time around 50pts lower at 5950. Watch levels: Bullish 5975, Bearish 5915.

The positive opening call (again with technical caveats, see above) comes thanks to a positive US close as a depressed oil price regained some composure from 7yr lows courtesy of a weaker USD and despite a weak Asian session with investors on edge as the Fed begins the two-day FOMC meeting that could culminate in the first US rate hike in nigh on a decade with repercussions from emerging markets to high yield debt.

Asian markets lower as Fed rate rise jitters offset some welcome progress by energy names on the back of the oil price bounce, which could well prove another short-lived tease given the prospect of more supply from Iran and Libya - maybe even the US lifting its export ban - adding to global glut worries and, turbulence rises in credit markets and uncertainty on China still rife. Japan’s Nikkei seeing the weaker USD hurt exporters via a stronger JPY.

US bourses closed with gains yesterday on short covering and bottom picking. But it’s unlikely that Friday’s lows were the bottom everyone was hoping for as oil consolidates in the $30s. Moody’s is attempting to soothe concerns about a Fed rate hike, saying that a move at this week’s FOMC meeting would confirm that the US economic recovery is marching onwards. A more cautious tone also presented itself this morning, however, with Jon Hilsenrath in the WSJ talking of a potential u-turn that could see rates back near zero within 5 years if the Fed gets it wrong. That’s what’s rumbling markets...

In focus today we have Spanish Consumer Price Inflation (CPI) data seen confirmed deflationary in November and the UK maybe even joining it on both the CPI and PPI (Producer Prices) front, adding to worries about sustained deflationary pressure, especially after another leg down by oil, and the impact on central bank trajectory. ZEW surveys seen delivering a mixed bag in Germany and Europe.

In the afternoon, with all US data in focus ahead of the Fed’s policy decision (good enough, not good enough?) watch out for the Empire State Manufacturing print expected to improve, although US CPI may have gone back flat in November, although core inflation may have ticked up closer to target along with the all important wages.

...oh, and not forgetting the oil price of course! Still under pressure from the continued global supply glut concerns, with Saudi Arabia still viewed as the only one with the power to control crude prices. Why? Anyone could cut production, but it is of course all about market share. Competition, not collaboration. Competition brings prices down.

Gold could make it back towards falling highs resistance $1070 today, if this morning’s USD weakness continues. The yellow metal enjoying an inverse relationship with the US Dollar means that volatility can definitely be expected tomorrow and Thursday. What will be interesting though is how the USD reacts to a rate hike in the medium term: will it reach record highs (= bad for gold bulls but a boon for bears), or will a feeble move by the Fed send fixed income investors elsewhere in search of better returns?

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

• Petrofac says performing in line with expectations
• Galliford bappointed to education projects worth £85mn
• Aveva and Schneider call off merger
• Segro says Hermes buys two of its industrial estates for £47mn
• Great Portland Estates refinances Great Ropemaker partnership
• Gresham House says finance director Abbot intends to retire
• Utilitywise says trading in line with expectations
• Utilitywise says in talks with suppliers for more favourable payment terms
• Henderson completes £25m share buyback programme
• UK's Carpetright first half profit jumps 34%