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

UK 100 called to open -15pts at 6615, having tested below 6600 to extend losses towards 6500 as suggested due to a confluence of bad news and data this week coming to a head after yesterday’s disappointing US economic/sentiment prints and another cautious start in Asia with China’s Official Manufacturing PMI unchanged suggesting headwinds from property slump.

US markets closed with modest losses after a string of disappointing US data (Consumer Confidence, Chicago PMI, Case-Shiller House Prices) which countered the recent views of the US economy gathering steam and being able to cope with an impending Fed interest rate rise something which sees USD continue to climb.

Overnight, Asian bourses mixed (Hong Kong and China closed) after negative Wall Street close, with continued investor uncertainty on account of political unrest in Hong Kong and persistent concerns about global growth outlook following China data.

Australia in the green thanks to weak AUD and China Manufacturing PMI being at least stable (biggest export market) and despite its own Manufacturing index deteriorating further into contraction. Japan’s Nikkei in the red despite some good BoJ Tankan Survey data and weaker JPY (USD/JPY >110), maybe hurt by decline in Manufacturing PMI.

With yesterday’s US data in mind, much will likely be made of any US economic prints between here and Friday’s Non-Farm Payrolls, notably today’s ADP Employment Change (expected stable) which is often regarded as an NFP warm-up, as well as the US PMI Manufacturing (seen flat) and ISM Manufacturing (forecast down a touch) this afternoon.

In focus also today, European Manufacturing PMIs are expected to show Spain, Italy, Germany and the Eurozone all giving up ground in September, but France improving, albeit still in contraction along with Italy. UK Manufacturing PMI is expected to have improved a touch and remained firmly in growth territory, to the same extent as previous struggler Spain.

Ahead of the ECB policy update this week note the FT reporting that President Draghi was pushing to accept junk rating asset-backed securities (ABS) from Greece and Cyprus in its new asset purchase programme.

The UK 100 index remains in a downtrend from highs of 6900 and under pressure at the new lower level 6600. While bears cling to hope of further downside, which remains a distinct possibility, we note the bulls getting excited at the prospect of a bullish falling wedge pattern which could lead to a break to the upside and a recovery rally towards the highs from whence we come. Watch for breaks of 6600 and 6650.

In commodities, Gold at $1205 is the cheapest since January and Copper as commodities post their worst quarterly performance since 2008 as an ever stronger USD (prospect of an early US interest rate rise) and slowing growth in China hurts demand for safehavens and industrial metals alike despite geopolitical unrest.

In Oil, US Light crude and Brent both fell a chunky $4/barrel on talk of liquidation at a commodity fund and OPEC supply jumping to its highest in almost 2 years. The continued climb of the USD is also not helping.

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