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

UK 100 Index called to open -25pts at 6340 after the major US equity indices closed sharply lower last night, extending last week’s selloff amid volatile trading to test new multi-month lows, and all falling below their technically important 200-day moving averages as concerns over the strength of global economic growth and the spread of Ebola (airlines major underperformers) continue to weigh on risk appetite.

The USD weakened amid guarded Fed signals and as Oil prices fell to near 4-yr lows on OPEC supply discord. Chicago Fed president Evans said the Fed must be ‘exceptionally patient’ before raising rates (his forecast: early ‘16) with inflation too low and that employment/inflation targets are 3yrs away. The ECB’s Weidmann says the ECB’s most recent policy is at the boundaries of its mandate and controversial.

In Asia overnight, stocks mixed with Japan’s Nikkei the standout loser, dropping below 15,000 for the first time in 2 months, impacted by further USD weakening on world growth worries and the resulting stronger JPY hurting its export constituents. Japanese data overnight showed a PPI miss but money supply solid, however, note the plunge in UK BRC like-for-like sales which could weigh the already struggling UK Index retailers.

Australia in the green thanks to gains in mining names after a surge in iron ore prices from recent lows, even after Aussie business surveys fell to their lowest in 4 months and the AUD strengthened despite RBA governor stating the currency was still overvalued and a weaker AUD would help rebalance the economy. In another sign of policy easing, China’s PBOC cut the rate on repurchase agreements again (twice in a month).

The UK 100 index remains under pressure likes is peers. A transatlantic distinction can be made, however, with European bourses making new 2014 lows, but US equities yet to fall that far. The UK Index ’s regain of 6300 and bounce off the level overnight is a positive, but note what happened at 6500 last week. Our watch levels are a bullish 6400 and bearish 6300.

In focus today, UK Consumer Price Inflation is seen giving up ground in September, easing rate hike fears. German ZEW Business Surveys are also expected to disappoint, in-line with recent data from the nation, which is seen having a knock-on to Eurozone Industrial Production which is seen plunging in August. Eurozone Finance ministers meet with France’s 2015 national ‘no austerity’ budget seen as highly contentious.

Results season also gains momentum with US banking majors JPMorgan, Wells Fargo and Citigroup reporting early afternoon (watch how UK banks react), followed by tech giant Intel after the US close.

In commodities, the safehaven Gold continues to hover around $1235, its highest in almost 4 weeks on speculation the US Fed may delay raising borrowing costs due to slower global growth which has hurt the USD. The price of Oil has extended its rout to hit its lowest in 22 months and bear market territory on speculation of stockpile growth exacerbating a global demand glut.

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