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

UK 100 Index called to open +20pts at 6095 in an ever-narrowing pattern, still under pressure from August falling highs but still managing to register rising lows. Potential for a break either way, although as we’ve said repeatedly renewed bullishness likely still needs a bettering of late Aug highs 6260 before banking on a recovery to 6700 while the bears eye any drop below 6000 before assuming any revisit of 5770 recent lows. Updated Watch levels: Bullish 6150, Bearish 5970.

The positive opening call comes despite Chinese trade data delivering a mixed picture about growth in the world’s #2 economy with exports -6.1% not as weak as expected (although still down for 2 months running), reviving global growth recovery hopes, but imports -14.3% adding to worries about domestic growth. More to worry about? Or simply a timing issue impacted by tough comparables last year and this August impacted by the Tianjin explosion and Victory day holiday?

Asian equities mixed overnight (absent of US cues on account of Labour Day holiday) with Japan’s Nikkei in the red after the JPY strengthened following upwardly revised Japanese Q2 GDP contraction which added to less bad China exports data. There was also an element of safehaven seeking after China trade data suggested continued domestic fragility with a potential global knock-on, especially after yesterdays’ downgrade to 2014 reported growth. More stimulus possible?

Australia’s ASX in the green, helped by China bourses finishing positive (still volatile) despite poor trade data, more M&A activity in the Oil sector (Woodside offers A$12bn for Oil Search, taking advantage of low oil price) and despite poor Aussie Business Survey data. Other M&A includes Mitsui Sumitomo mulling a bid for the UK insurer Amlin (AMLN) adding to existing sector consolidation with Swiss Zurich Insurance's  bid for RSA (RSA) and Partnership Assurance's (PA.) tie-up with Just Retirement (JRG).

US markets were closed on Monday but we did get some Fed chat from a less hawkish than usual San Francisco chief Williams, giving market participants little to chew on ahead of the Asian open with his view that a US interest rate rise as still possible in 2015 ‘as long as risks dissipate.’

Risks in the form of stronger dollar and low oil prices putting downward pressure on growth and inflation together with stock market volatility that, while not necessarily reflective of the US (or Chinese for that matter) economy, does compound uncertainties about the global economic outlook.

The mixed Chinese data comes a week ahead of the Fed decision whether to raise interest rates for the first time in almost a decade. Can markets deal with a hike? Sure (they’ll be slow and small) but markets could also happily do without a hike for a while longer. Recent market volatility and uncertainty about growth ex-US likely to be a reason for Janet and co. to hold off until at least year-end.

Other overnight data showed an improvement in the German Trade Surplus as both Exports and Imports rebounded more than expected in July, highlighting the disparity in both regional and global growth. The UK’s BRC Retail Data was much weaker than expected in August backing up the BDO report last week which hit Retailers hard, hurt by bad weather, a strong GBP and more foreign holidays.

In focus today will be Eurozone GDP data which is expected to be confirmed at 0.3% QoQ and 1.2% YoY, down from 0.4% QoQ in Q1, but the annualised rate up from 1.0%. Thereafter it’s over to the US in the afternoon for what consensus forecasts to be improved NFIB Small Business Optimism and Labour Market Conditions. After Williams spoke overnight, note the Fed’s Kocherlakota speaking late tonight, while there are likely to be more comments in Europe about the ongoing refugee crisis.

Crude prices benefitting from a USD basket coming off its highs, to the extent that Monday’s slump has been brought under control to leave both WTI ($44) and Brent ($48) flat-to-positive this morning, with significant positivity checked by the usual drivers: global oversupply, China…

Gold ($1119) back beneath $1120 on weak physical demand (a lacklustre Indian monsoon, apparently) and despite a brief let-up in USD strength making the yellow metal less attractive and… less expensive to non-US buyers. No doubt all this talk of interest rate hikes is keeping attention on interest bearing bond markets as safe havens, rather than a somewhat more passive Gold.

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

• Punch Taverns disposes of Matthew Clark stake
• Betfair, Paddy Power agree $7.7bn tie-up
• Astrazeneca says to invest in oncology bioinformatics collaboration
• Whitbread eyes savings, price hikes to offset living wage hit
• Fenner sees FY results in line with expectations
• Hikma says to buy Egyptian pharma firm EIMC United
• 'Help to Buy' boosts builder Redrow with above – expected profit rise
• Ashmore's assets under management slide to $59bn; profit, revenue up
• RSA to sell Latin America operations for about £403m