Markets are hooked on one big event
Markets are still fixated on one big event – The Federal Reserve announcement at 7.00pm tomorrow.
The Federal Open Market Committee (FOMC) may decide to start slowing the pace of its asset purchases, as the US economy recovers and the Fed doesn't deem QE as necessary.
Investors expect the withdrawal of that support to make equities less appealing. Recent labour market and industrial production data has made some worried that tapering could begin tomorrow.
Today we've got US inflation numbers at 1.30pm – which could provide more insight into tomorrow's FOMC verdict.
Ishaq Siddiqi, market strategist at ETX Capital, says that most market participants still see a decision to taper early next year, "as the US economy needs to show greater momentum".
He points to the recent two-year budget deal by the House, which should prevent a government shutdown next year.
In September, when the Fed rejected the opportunity to taper, Federal Reserve chairman Ben Bernanke pointed to "upcoming fiscal debates [that] may involve additional risks to financial markets and the broader economy."
That was ahead of a temporary government shutdown in October. With those fiscal squabbles out of the way, some now see a clear road for a decision to taper tomorrow.