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

UK 100 called to open -35pts at 6645 (note: ex-div impact -14pts) after a risk off session in Asia followed a weak finish in the US where gains turned to losses following threats from Russia of retaliatory sanctions (closure of trans-Siberian flight paths) on the US/EU and a Polish warning that recent Russian troop movements were either to pressure or invade Ukraine.

Europe had closed with gains and some stabilisation helped by positive US macro data which bode well for Q3 economic growth took the USD to a 9-month high, however, US stocks turned about to finish with sizeable losses with the initial drop blamed on index stops being hit and then much made of the Polish warning about Russian troops reviving concerns about heightened tensions in the Ukraine region.

Note the Telegraph today reporting that Russia is eyeing a $20bn oil deal with Iran to bypass Western sanctions which will surely only go to add fuel to the fire.

Overnight data was thin, but largely disappointing with UK BRC Shop Price Index showing deflation accelerating to -1.9% YoY in July, the lowest since the series began in December 2006, impacted by agricultural commodity price declines and supermarket wars.

The big surprise was the surprisingly weak German Factory Orders for June, dented by big falls in foreign orders (notably the Eurozone) and for investment goods which will reinforce concerns about the impact of geopolitical uncertainty and the strength of economic recovery in Europe.

The UK index is back below the breached trendline of rising support from February with overnight lows in the region of those of late last week. The brief rebound may indeed have been a pause before another leg down, so watch for any breach of 6620. On the upside, recovery potential could take us back to 6700.

In focus today we have results from Standard Chartered which will be watched closely given the volatility in HSBC after it reported yesterday and with news that STAN may be back in the crosshairs of US regulators. UK Industrial & Manufacturing Production seen rebounding in June, although after the weak German number this morning be prepared for a potential surprise.

In the afternoon we have the US Trade Balance which is seen pretty much unchanged but could move the USD and then the latest NIESR UK GDP Estimate to close the day, which will be keenly watched seeing as the UK is the one of the fastest growing major nation’s at present. Can it keep the pace?

Gold still foundering below $1300, off its lows, but with a series of falling highs from late July. Despite market relief being short-lived, risk-off has returned but the yellow metal doesn’t seem to have got the memo, still preoccupied with the path of macro data, inflation and interest rates  rather than safehaven necessity.

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