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

UK 100 Index called to open +15pts at 6035, with overnight trading holding on to yesterday’s break-out above 6000 and even venturing close to testing the next key level 6050. This offers hope of a bottom and reversal of December’s sharp downtrend, although the 9% pullback will of course have left technical hurdles along the way for any retrace (6100, 6200). Watch levels: Bullish 6060, Bearish 6015.

Calls for a positive European open comes in the wake of a very strong Asian session - best gains in two months; almost as strong as Europe yesterday - which took US and European futures higher overnight and extended the global rebound as we inch closer to this evening’s Fed policy decision. This suggests markets happy for the Fed to pull the trigger, on the assumption further hikes are moderate and gradual and that the move is a vote of confidence on US economic recovery.

Or could doubts be creeping in about the effects of recent market volatility? Could we get another episode of the September swerve? Central bank credibility is at stake with the Fed wanting to hike to avoid both a Draghi-like disappointment as well as having to backtrack later.

Japan’s Nikkei higher for its first day in three, and broken back above 19000 thanks to renewed JPY weakness as the USD firms up ahead of what is expected to be the first Fed rate rise in almost a decade after various economic and financial crises. A rebound in oil from its lows has also helped the region’s Energy names, even if subsequent USD strength and the prospect of the US lifting its 40-yr Crude export ban is now weighing.

US markets had a second strong day on Tuesday with the Dow Jones index bedding back in above 17500 after US congressional leaders agreed on a fiscal plan that would avert a government shutdown and lift the 40-year ban on oil exports, which shouldn’t impact the oil price negatively by the way (plenty of other drivers for that).

As for this evening’s (UK time) Fed rate announcement, the overriding expectation is for a 25 basis point hike (which is more or less priced in already) while the real market moving aspect will undoubtedly be the Fed’s language for its indications as to the future pace of tightening - unlikely to be mechanical and constant as it was in the run up to the financial crisis. Of course, there remains the outlying possibility of a surprise.

In focus today, it’ll all be about the Fed. Everything. Tutti. The big events are 7pm and then 7.30pm. However, we do also have Eurozone PMI Manufacturing and Services data which if still solid, could vindicate the ECB’s vote to avoid more QE earlier in the month, although the reads on regional Consumer Inflation are unlikely to be as helpful likely having fallen back negative in November.  UK employment data seen unchanged, although earnings growth may have cooled. In the afternoon, US housing data seeing delivering a mixed picture and industrial/manufacturing production still weak.

Oil prices remain in an uptrend from Monday’s lows but still finding resistance below $40, hindered by an overnight USD rally which will have kept volumes across the commodities sphere muted ahead of potential Fed-induced volatility later on this evening.

Gold has also trended up slightly this week, gaining $5 over the past two days, while many expect a drop back below $1000 if a US rate rise is announced. That’s a pretty big move for gold and an interesting prospect given that rate hike volatility should be short-lived.

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

• AstraZeneca boosts respiratory unit with $575m Takeda deal
• Wood Group wins $400m contract
• RBS eyes trade sale or IPO for Williams & Glyn unit
• Foxtons commences share buy back
• Dixons Carphone beats first – half profit forecasts on strong UK
• Watchstone granted suspension of trading from 7.30am on Dec 16
• Alliance Trust exits fixed income, sells commercial property
• Kier Group Wins £300m of New Contracts
• Rolls-Royce Shakes Up Management to Boost Growth
• Bunzl Reiterates 2015 Expectations; Makes Acquisitions in France, Chile, Spain
• MX Oil Wins Concessions in Mexican Onshore Bid Round