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

UK 100 called to open +5pts at 6805 after a mixed US close thanks to weaker than expected US Industrial Production data (first fall since Jan) and the OECD slashing global growth forecasts, and even if US Empire State Manufacturing surprised to the upside, registering its best level in almost 5 years, the all-important employment component plunged.

Traders still appear nervous ahead of a potentially pivotal US Fed FOMC meeting and statement where many expect the message to be less dovish, if not slightly hawkish, and that it may signal and early start to its policy tightening, as well as geopolitical risk remaining so prominent.

Even news that e-commerce giant Alibaba had raised its IPO price range due to high demand, and with more M&A from Microsoft and Orange, wasn’t enough to boost sentiment across the board, with Tech and small caps struggling under the weight of high valuations and a defensive bias to trading.

Overnight, Asia in the red ahead of the Fed meeting and after the OECD growth cuts which have been further supported by China Foreign Direct Investment plunging to a 4-year low in August following a very weak July suggesting a loss in external confidence, adding to the fears of a hard landing derived from the weekend data, although despite Trade Ministry seeing no obvious signs of capital outflows.

In focus today we have UK inflation data with CPI seen rebounding in August but cooling annually although PPI is seen remaining weak, albeit input prices less so than in July. The implications of the data on a BoE rate rise expectations and GBP may nonetheless be lost on traders during a week in which those north of the border decide on their future.

In Europe, the ZEW Surveys are expected to give up some ground in September suggesting lingering difficulties in the Eurozone while in the US Producer Price Inflation is seen a touch softer in August even if better over the last 12 months. Elsewhere look out for France’s Parliamentary confidence vote given socialist President Hollande’s record low popularity.

The UK 100 remains in its downtrend form the beginning of the month but managed to recover from its lows of yesterday thanks to weaker than expected US data which saw some adjust their expectations that the US Fed would turn more hawkish on Wednesday. Support at 6750, and still potential for a revisit of 6905, but with the Scots holding some sway into the week-end depending on how they vote.

In commodities, Gold has extended its bounce from recent lows helped by some bargain hunting and renewed safehaven seeking as investors assess the health of the US ahead of the Fed FOMC meeting and talk of China boosting its reserves. The metal is still heading its first quarterly decline of 2014.

In oil world, both US Light Crude trades at its best price for more than a week having found some support around $91.5/barrel ahead of US inventory data which may signal a decline and thus increase US fuel demand and economic growth. Brent Crude steady although eyes are on OPEC for any hints of reduced exports to get the price off its 17-month low and back nearer/above $100/barrel.

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