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

UK 100 Index called to open -20pts at 7055 having weakened since yesterday’s volatile UK close but traded largely sideways overnight. The uptrend since last Friday remains intact for now with support at 7050, but the failed attempt at all-time highs yesterday will have disappointed many. The Bulls are pleased to still be above 7000, within touching distance of fresh all-time highs. The Bears will be hoping the current uptrend gives way. Watch levels: Bullish 7075, Bearish 7040.

The negative close comes in spite of a positive Asian session countering a negative US close. Markets are back dwelling on the outlook for global monetary policy with fresh hawkish Fed chat adding to jitters about the possibility the ECB has discussed tapering its QE programme. Another taper tantrum if you like, which adds to existing woes about a hard Brexit, the IMF cutting growth forecasts, the US election and the health of systemically important Deutsche Bank.

With the ECB’s QE bond purchasing programme end-date (March 2017) fast approaching it’s no surprise that tapering may have been mentioned, however with the central bank still struggling to find enough bonds to buy it is more likely it discussed lower purchases for longer. Tapering of sorts, but to make things easier rather than discussing a pre-mature exit of the programme.

Japan’s Nikkei is being buoyed by a weaker Yen but Australia’s ASX is hindered by yesterday’s Gold price sell-off hurting miners, even if higher oil prices help the energy sector. US equities finished lower after a flat start, triggered by the strength of the US Dollar nearing two-month highs.

Oil has been buoyed last night by API data reporting a 7.6m barrel drawdown in crude oil stocks, yet another huge drawdown after a predicted forecast of a build. The US Dollar showing some overnight weakness against the Euro will be welcomed by commodities investors. This afternoon’s DoE EIA Inventories will be keenly watched, will it continue its run of drawdowns just like API?

Gold saw a 3.5% drop in price yesterday as hawkish speeches from central bankers and a strong US dollar saw investors cash out on a strong yearly performance from the precious metal, breaking strong support at $1300 to its lowest level since the Brexit vote. A mild rally overnight may be short-lived if further USD strengthening occurs today in reaction to speeches from European leaders May and Merkel.

In focus this morning, September Eurozone Services PMI figures (individual + regional), everyone (with the exception of France) giving up a little ground, but still expanding . The UK figure is also seen easing, but likely still continuing to poke fun at Brexit doomsayers with a solid rebound and expansion, as seen with Manufacturing and Construction. Eurozone Retail Sales is forecast negative in August, but may simply be normalisation from a strong July print.

This afternoon’s US data will be of interest after last night’s hawkish comments from non-voting Fed members Lacker and Evans. September’s ADP Employment change (Non-farm Payrolls warm-up for Friday?) is seen around average while US PMI Services and ISM Non-Manufacturing improve, but August Factory Orders growth is seen in the red. US weekly Oil Inventories are sure to garner much attention after another very strong API drawdown last night. Watch the oil price.

On a busy day for speeches, UK Prime Minister Theresa May’s keynote speech at the Conservative party conference will be keenly watched for any more indication about the UK’s EU exit (more hard Brexit rhetoric? Further Sterling weakening?).

Other speakers of note include German Chancellor Merkel, EU President Juncker, the ECB’s Nowotny and Angeloni and the BoE’s Broadbent. The Fed’s Lacker and Kashkari speak again to keep us on our toes about Fed policy outlook.

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UK Company Headlines: (Source: Reuters/DJ Newswires)

• British retailer Tesco raises margin target after profit rise
• Stocks, gold and bond prices slip on talk of ECB taper
• BHP says its Gulf of Mexico Mad Dog project economical at current oil price
• Air Berlin in talks with TUI, Etihad about tourist business
• Topps Tiles sees FY LFL sales +c.4.2%
• Hastings Group placing at 216p per share – bookrunners
• Time Out Group signs lease for Time Out market in Portugal
• Moody's says Brexit adds to UK clothing retailers' woes, overall retail outlook stable into 2018
• BHP Billiton says positive drilling results at Caicos exploration well in Gulf Of Mexico
• Russia's Rosneft, Indonesia's Pertamina agree on refining, production JVs
• Vedanta considering revival of Malco unit – Business Standard
• Oil major BP buys first Iranian Oil since lifting of sanctions – Bloomberg
• UK Sept car sales rose less than 2% – preliminary data
• Guinness Nigeria says Diageo Plc will not proceed with offer
• Oil prices rise on report of U.S. crude stock draw