Morning dominated by anticipation of Fed decision

Overnight saw a firming of risk appetite,with stocks and higher-yielding currencies gaining.

UP

Stock market indices gained strongly over the Asian session on improving risk appetite. The Nikkei added 1.46 percent,while Hong Kong and Shanghai added 1.22 and 1.12 percent respectively.

AUD added 0.11 percent against the dollar to USD0.8866. NZD added 0.21 percent, aided by stronger-than-expected October business confidence numbers, up from 13.4 to 26.5, with the gains attributed to improved certainty after recent elections. The October activity outlook also improved slightly on expectations, edging up from the September print of 37 to37.8.

DOWN

The dollar was under pressure overnight,losing ground to the majority of the majors, with direction dictated by anticipation of Fed announcements later today.

DAY AHEAD

The biggest event of the day will be the Fed’s October FOMC announcement, but before that we have Bank of England mortgage approval numbers due that are expected to follow the BBA’s numbers last week in indicating a slowing down of borrowing driven by measures in the BoE’s mortgage market review.

Anticipation of he October FOMC announcement will dominate markets through the European session. Fed chairmanJanet Yellen is expected to announce the final tapering of the Fed’s open-ended quantitative easing programme. However, it is expected that she will play down potential for rate hikes in the near term, opting to maintain loose policies while the US economy remains fragile.

UK POLITICS

While David Cameron has said that “we are not paying anything like” the GBP1.7bn demanded by the European Commission last week, a poll carried out by ComRes for The Independent showed support for Ukip at a record high.

Chancellor George Osborne and otherEuropean finance ministers are holding emergency talks on the bill, trying to force down the UK’s contributions. The issue has already caused rifts withinCameron’s Conservative Party, with some backbench MPs threatening rebellion unless the bill is cut below GBP400m.

Despite Conservative opposition to the EC bill, the amount has helped to give Ukip a boost in support, up to 19 percent according to the ComRes poll carried out for The Independent.

The Conservatives are up one point to 30per cent to bring them level with Labour, which has slumped by five points to its lowest level under Ed Miliband.

The Liberal Democrats are down by one point to nine per cent, the Greens unchanged on four per cent and others unchanged on seven per cent.