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

UK 100 Index called to open -20pts at 6400, as investors tread cautiously following confirmation of Ebola in New York (ER doctor back from W Africa), Amazon’s Q3 results miss and weak Q4 forecast (shares -13%) and overnight China data offering little to perk up sentiment.

European and US stocks closed higher after upbeat earnings reports from the likes of Caterpillar, 3M and GM, while mostly positive macro data (jobless claims 14-year lows, US Leading Indictor suggests growth momentum, Chicago Fed rebound, US house Prices and Eurozone Consumer Confidence rise) and a rally in oil (Saudis cut supply in September) maintained positive sentiment.

After the close, tech giant Microsoft Q3 sales and profits beat estimates, sending shares 3.7% higher, thanks to recovering PC sales (corporate replacements) and demand for Internet-based cloud software and services, however, news of Ebola on US soil took the wind from futures markets and put optimism in check.

Asian stocks mixed despite Wall Street’s strong finish on heightened Ebola worries and renewed concerns about China after property prices fell further and the China Conf Board Leading Econ Index reported “6-month growth rate easing steadily throughout Q3….. downside risks in the months ahead”. Japan’s Nikkei outperforming thanks to stronger USD and thus weaker JPY.

While China property price weakness is no secret, the fact that we have our first annual decline in nearly two years as the real estate market softens and lenders turn more cautious as policy easing fails to halt the downturn will no doubt intensify calls for more stimulus to avoid a bubble bust and hard landing.

While Tesco fell 6.5% yesterday on news of a bigger black accounting hole and the Chairman stepping down, let’s see how markets price in long-term debt rating downgrades by Moody’s and Fitch which are sure to increase financing costs.

The UK Index continues to hover around the key 6400 level despite tests both higher and lower yesterday. The trendline of rising support from last week’s low remains intact as does the prospect of a bullish Inverse Head & Shoulders reversal pattern being delivered. Watch levels move marginally to bullish 6450 and bearish 6350.

In focus today we have the advance print for UK Q3 GDP which is seen slowing slightly, while US New Home Sales are expected to have been weak in September, normalising after a very strong August. Q3 results continue with Shire, Ford, UPS (global growth barometer) and P&G all reporting before the US open.

In commodities, yellow metal safehaven Gold trades around $1230, heading for a weekly loss as equity markets advance on earnings reports and macro data but weakness curbed/support thanks to the mix of physical demand and continued uncertainty (growth, Ebola).

Oil prices back off their lows thanks to news of Saudi Arabia cutting market supply in September even as output edged up. Strength hindered by speculation a drop in Saudi Arabian oil supplies isn’t a signal that OPEC’s largest producer is cutting output.

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