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

UK 100 Index called to open +70pts at 6535, making it above another key level (6500) which reverted to support overnight and continuing to retrace the recent correction. The next hurdle looks to be 6640, the breakdown from the end-Nov/early-Dec sideways shift. Note the Daily RSI still recovering from oversold. Santa’s Rally might be a bit late and only reversing recent declines but it is a welcome trend to see and gives hope to a revisit of recent highs 6750 or even 6900. Watch levels: Bullish 6575 and Bearish 6475.

Another very positive opening call comes courtesy of a very strong finish for US stocks (and European) as the Fed’s latest ‘patience’ statement was digested well, boosting hopes of low rates for longer, assessment of global economic health improved and despite Oil falling back to recent lows and some mixed US data.

Note the Dow Jones delivered its biggest one day gain in 3 years while the S&P500 made it the biggest 2-day gain in 12 years.

Asian stocks again taken the US lead, posting biggest rise in 15 months amid hopes that the Fed is in no hurry to raise rates soon, while the Bank of Japan (BoJ) left policy unchanged again, as expected following end-October’s surprise, but gave a more positive economic outlook. The Nikkei is being helped by the strong USD and weak JPY.

While we all fret about growth in China, note the China Stats Bureau revised up 2013 growth by 3.4%, although it will have no effect on 2014’s growth rate (a case of under-promise and over deliver?). Shares down-under outperforming in the region lead by resources and boosted by the weak AUD.

Overnight data included a disappointing UK GFK Consumer Confidence (back from recent highs), suggesting Brits increasingly worried about the economic outlook, despite extremely strong November Retail Sales figures yesterday (more confident about own finances).

German GFK Consumer Confidence, however, continued to improve to make a new 2014 high. Note also that while the Eurozone toys with deflation, German Producer Prices recovered to breakeven in November, possibly taking some heat off ECB President Draghi & Co in Frankfurt.

In focus today we have UK CBI Reported Sales for December which will be of interest given the strong UK Retail Sales figures for November. Given the continued focus on the Fed, the opening remarks from Evans in Chicago will be eyed, as well as colleague Lacker after the European close. The Kansas City Fed Manufacturing Index is seen stable in December.

In commodities, Gold still struggling around the $1200 level even if we did see some volatility and a visit of $1210 yesterday, hindered by the Fed statement confirming small steps towards rising rates which has kept the USD strong and made the metal more expensive to buy. The equity rally also negates safehaven demand as risk sentiment rises as does low inflation, removing the need for a hedge.

Oil back down at recent lows (US Light Crude at $54/barrel, Brent at $59), hindered by the strong USD, the OPEC Cartel refusing to budge on production levels and continued questions about global consumption appetite. Note ratings agency Fitch has downgraded Venezuela to CCC from B due to the lower oil price saying it will hurt the commodity-dependent (92% of external receipts) OPEC member nation’s balance of payments, eroding its main source of FX. More downgrades to come?

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Key Overnight Macro Data: (Source: Reuters/DJ Newswires)

• UK                          GFK Consumer Confidence                         Miss, deteriorated
• Japan                    Monetary Policy                                               Unchanged
• Japan                    All industry activity                                          Miss, contracted     
• Japan                    Economic Performance Indices                  Mixed
• Germany             Producer Price Inflation                                 Beat, recovered to positive
• Germany             GFK Consumer Confidence                         Beat, improved

See Live Macro Calendar for full data line-up, incl. consensus expectations

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

• Smiths Group CEO to retire Dec 31 2015
• UBM says FY trading and outlook remain in line with expectations
• Carillion selected as preferred bidder for London regeneration project
• Berendsen says trading in line with its expectations
• Daisy Group says applied for cancellation of trading on AIM
• Centrica says Langage and South Humber awarded one-year capacity agreements
• British American Tobacco reaches $575 mln litigation settlement
• Keller Group sees FY results in line with current market expectations
• Centrica gas-fired plants win in UK capacity auction