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

UK 100 called to open +45pts at 6500, with index futures bouncing overnight after the sharp sell-off to near 2014 lows induced by ECB President Mario Draghi giving little indication that he was considering outright QE, something which central banks have used to boost risk appetite (UK, US, JP) for the last few years.

While he offered more details on his Asset Purchase Programme he didn’t show his hand entirely and while open to more unconventional measures he ruled out further rate cuts which didn’t soften the mood.

Fuel to the fire came from US Factory Orders slumping more than expected (due to large Boeing orders last month) leaving the US recovery under question, and IMF Chief Lagarde saying the global economy is weaker than it expected 6 months ago and potential growth has pared, even if ISM New York made a surprising jump and US Jobless Claims improved.

US markets recovered, however, to close almost flat, after geopolitical worries received a welcome 11^th hour boost from Hong Kong Leader Leung saying his government would discuss constitutional reforms with protestors, but that he is not planning to step down.

Bourses in Asia cautiously positive ahead of the US Jobs report this afternoon where a big improvement is expected after last month’s surprise drop in job creation even though the unemployment rate returned to its July low. Revisions could be very interesting and dictate the market sentiment into week-end.

Hong Kong resumes trading unperturbed by protests or global growth worries after China Non-Manufacturing PMI growth fell to an 8-month low as the economic slowdown deepens adding pressure for more stimulus. Japan’s Nikkei benefiting from a rebound in PMI Services taking it back to growth and some safehaven seeking in the USD seeing the JPY weaken helping JP exporters. 

The UK 100 index completed the bearish flagpole pattern we had highlighted yesterday, and after falling as low as 6424, which almost took us back to 2014 lows of 6395, we have seen a bounce by the index futures overnight and a recovery to the 6500 level as we write. With the RSI showing an attempt at recovery from oversold, could a raft of decent Eurozone PMI Services and a stocking US jobs print help spark a rally?

In focus today, Eurozone PMI Services are expected to show Italy remaining in contraction while confirming flash readings that showed France dropping into negative growth, Germany improving from an already strong position and the Eurozone giving up a little growth towards its mid-year median. Draghi sure to be watching these closely and Eurozone Retail sales which are forecast to have recovered in August.

In the afternoon, the main event will be the US Jobs report and whether the change in Non-Farm Payrolls can make up for some of the surprise plunge last month, and whether the unemployment rate can stay at its lows, promoting US recovery and ability to live with the pending higher borrowing costs. Although note US PMI Services expected to confirm another dip in the strong growth recorded this summer.

In commodities, Gold has fallen back towards yesterday’s lows of $1210 extending its weekly drop, as the USD strengthened as investors assessed prospects for higher U.S. interest rates ahead of the US jobs report, making the safehaven metal more expensive.

For any help you may require placing trades or in terms of market information, put a call in to our trading floor – it’s all part of the service.