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

UK 100 Index called to open +20pts at 6720 thanks to a strong 110pt rebound getting the index back above 6700 even if we have given up some ground overnight. The Bulls will be hoping that the bounce is a genuine reversal back towards 6900 after the sell-off. The Bears hope this is simply a Bull-trap with another down-leg on the cards, especially with what could prove an overnight failure around 6750. Updated watch levels: Bullish 6745, Bearish 6715

A more positive market today comes after the Fed’s Brainard maintained a dovish stance which was a relief to investors concerned about a more hawkish consensus forming and the Fed pulling the rate hike trigger again next month. Add to this some positive China data overnight and risk appetite is decidedly more prevalent. Although if we are to pick holes in the latter, August Industrial Production, Retail Sales and Investment may have seen growth over the last year accelerate but year to date growth was unchanged suggesting help from stimulus earlier in the year may be petering out. 

Furthermore, a mixed Asian session  struggling for both traction and direction, coupled with oil prices on the back foot again (OPEC sees no let-up in the glut) could serve to dampen sentiment further, putting a stick in the spokes of the commodity space and hindering any rebound.

The Dow Jones staged a rally yesterday as the odds of a September Fed rate increase were slashed on the final day of speeches before the self-imposed blackout by committee members. Utilities and Telecoms, seen as the biggest losers on Friday’s tumultuous day for US stocks, staged small-scale recoveries as an element of bargain hunting took place during the day’s trading. Uncertainty from now until the FOMC policy update on September 21 could see US equities remain particularly volatile and expect any further political events to create waves in the absence of Fed chat.

Oil prices may have been dragged up along with the rest of the markets yesterday, a weaker US dollar offsetting earlier price falls due to worries about increased US production. However, we are back from the highs as worries persist about the global oil glut with OPEC warning that excess supply could continue well into 2017. If an OPEC-led production freeze can be agreed at a meeting in Algeria later this month prices could well break the $50 barrier, although the OPEC’s sweet words will need to be replaced with some meaningful substance.

Gold traded sideways yesterday as markets waited for comments from the Fed’s Brainard regarding a possible September rate rise. When she stuck to her usual dovish stance, gold (along with the rest of markets) reacted positively, reaching highs of $1330 overnight. Analysts predict no major moves in prices until the FOMC meeting next week and the continuation of its week long downtrend.

In focus this morning be UK inflation data with a rebound in CPI anticipated after a deflationary July and  the core level seen up a notch as a weaker GBP - the price of Brexit - makes imports more expensive and delivers inflation without helping growth. The UK House Price Index is also of interest with questions about the health of the market, especially London and the South East post-Brexit.

Thereafter, ZEW surveys are expected to show the current situation in Germany giving up a little ground although expectations are seen rising. The print for Eurozone expectations will also be of interest in light of Brexit, even if no consensus is available.

In the afternoon, US NFIB Small Business Optimism is expected to remain solid while the evening's US API Weekly Oil stocks are sure to set the tone for the official government data tomorrow afternoon. Especially  with OPEC seeing no let-up in the supply glut and markets preparing for that OPEC-led production freeze meeting later this month.

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

• Esure says to demerge Gocompare.com, will list separately on the LSE
• Esure 1H Gross Written Premiums +16%
• Ocado Q3 retail sales up 13.6 pct, highlights margin pressure
• IQE sees FY earnings in line with expectations
• JD Sports Fashion H1 revenue jumps 20 pct, ups dividend
• Sportech says to sell Football Pools for 97.25 mln stg
• Lender CYBG to meet financial targets sooner than expected
• Copper holds above 12 – wk low on China data, as rate hike jitters subside
• Oil prices fall on profit taking, eyes on China data