U.S. stock indexes printed small gains yesterday as market participants begin to focus on the two day Federal Reserve meeting.  Analysts are looking for policymakers to provide further monetary stimulus – QE4? However, the Fed watchers will also be watching for any signs of deal or lack of deal concerning the fiscal cliff.

The FMOC is expected to release monthly purchases of $45 billion of Treasuries that will start in 2013 at which time the existing Operation Twist program currently buying bonds is scheduled to expire.

 

Noteworthy Headlines

European shares dip, euro steady ahead of ZEW, Fed

Wal-Mart (WMT, quote) under fire in India, government signals probe

Exclusive: After fire, Wal-Mart vows to tighten source safeguards

JPMorgan (JPM, quote) No. 1 in U.S. customer survey, while rivals fall back

 

Overnight Sessions

Asian Markets

Overnight Asian markets ended session broadly higher on signs that U.S. policymakers are showing signs that talks are progressing in the right direction to avoid the U.S. fiscal cliff.

Australian equities end higher on session in fact the Aussie bulls push equities to their highest level in over 16 months.

Japan’s equities ended the session lower plagued by power utilities.  The Japanese government created panel to assess the country’s utilities and reported that a nuclear reactor was likely sitting on an active earthquake fault. Concerns that it the power plant could be shutdown dampened equities.

Chinese stocks pulled back after previous sessions strong move higher.

 

European Markets

Euro Zone markets added to their gains in early trading on improving sentiment over the U.S. budget (fiscal cliff) negotiations and a unexpected jump in German investor sentiment.

Euro Markets are reacting to the better than expected Germany ZEW index climbing to 6.9 for the month of December, blowing away analysts’ expectations of a minus 11.3 reading

Commodities

WTI Crude oil prices reversed the 5 day losing streak in early trading as risk on sentiment creeps back into equities and the U.S. dollar moves lower.

Traders will be focused on the meetings of the Organization of Petroleum Exporting Nations and the U.S. Federal Reserve taking place this week.

Be sure to check Tom Pawlicki Daily Energy Report for an in-depth review of the energy patch.

Equity only readers can gain exposure to WTI Crude Oil through the United States Oil Fund (USO, quote) ETF that seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The USO will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil.

 

Currencies/FOREX

EURUSD remains in downtrend from 1.3125, the rise from 1.2877 is likely consolidation of the downtrend. Resistance is at 1.3000, as long as this level holds, further decline could be expected after consolidation, and next target would be at 1.2800 area. FOREX Market Analysis report.

 

Pre-Market Movers

AMERICAN INTL GROUP (AIG, quote) Treasury is selling  $234 million shares in final AIG sale.

KINDER MORGAN ENERGY PARTNERS (KMP, quote)  Spectra is to buy Kinder Morgan's Express-Platte Stake for $380 million and all of its Pipeline for $1.25 Billion

SOMAXON PHARMACEUTICALS (SOMX, quote) Pernix Therapeutics to buy Somaxon Pharmaceuticals

 

Economic Calendar

The Federal Reserve’s policy two day meeting begins today, ending with a statement at about 12:30pm ET tomorrow, followed by a news conference from Federal Reserve chairman Ben Bernanke.

October trade deficit numbers are out at 8:30a.m. ET, with forecasts for a $42.2 billion deficit for the month.

Wholesale inventories for October will be released at 10 a.m. ET, with economists expecting a 0.4% rise after September’s 1.1% increase.