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

UK 100 Index called to open flat at 6710, having made it above round number 6700, taking us closer to breakeven for 2014 (6750), but more importantly testing and clearing the rising highs of what has been a worrying bearish rising wedge pattern.

Now that’s behind us, potential for 6700 to become support for further advances towards September highs 6900 by year end. Is Santa’s Rally in full flow and early again? Our watch levels: bullish 6735 and bearish 6675.

US equities posted modest gains, with the S&P500 and Dow Jones making fresh record highs helped by positive data in the form of US Producer Price Inflation (PPI) offsetting deflation concerns and a rebound by the US NAHB Housing market Index while M&A boosted sentiment.

The Fed’s Kocherlakota reiterated the Fed needs to show more resolve in meeting its inflation target for credibility, and should do whatever it takes. In Europe, the ECB’s Praet said ECB staff has full freedom in preparing additional stimulus while the BoE’s McCafferty said when rate rises come they will be very slow and peak lower than in the past.

Asian equities in the red, ignoring the positive lead from the US, with Japan’s Nikkei finding resistance before 17500 after the BoJ left policy unchanged following last month’s QE expansion, despite the USD/JPY hitting a 7yr low, recent recessionary data and a call for snap elections.

The region appears uninterested by a jump in China’s MNI Business Indicator and solid readings for Japan All Industry Activity and Sentiment Indices.

In focus today will be minutes from the latest Bank of England (BoE) and US Federal Reserve (Fed) meetings. Expectations for the BoE to strike a dovish tone pushing expectations for a rate rise even further out, and while we had an unexpected pick-up in Consumer Price Inflation (CPI), yesterday, it remains near a 5yr low and may be down to seasonality. As usual, voting and views on Global economy will be key.

Fed minutes will be watched for more details on employment and inflation metrics being eyed. Will they be consistent and a little hawkish or contain more dovish-like discussion? Any chat on change of language? Data-wise, only US Housing Starts and Permits to keep things lively today, with expectations for a cooling in October after strong growth in September, but with growth still being registered.

In commodities, Gold has fallen back from its foray above $1200 as equities persist in the northern jaunt and ahead of Fed minutes which could provide more clues on the timing of the US Central Bank's first rate rise in 8 years.

Oil prices have slipped again towards 4yr lows amid speculation that OPEC will resist calls to cut output at its meeting next week (to cut or not to cut?) in an environment where prices are being pushed down by increasing production (US especially) and uncertain global demand (China, Europe). US Light Crude back at $74.2/barrel and Brent Crude $78.5/barrel. Note US Senate rejected legislation approving construction of TransCanada’s Keystone XL oil pipeline.

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