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

UK 100 Index called to open -40pts at 6355, back around Tuesday’s breakout level, which remains supportive following another test of 6400 amid the reversal from 6100. The rising lows from 16 Oct keep a 6900 recovery alive (9-23 Oct Inverse Head & Shoulders reversal pattern?). We move our watch levels to a bullish 6450 and bearish 6300.

The weak open call stems from a negative US close and Asian session after much higher than expected US crude inventories led to another slump in oil prices (27-month low), dragging equities lower on profit taking from the recent rebound and overnight China Manufacturing data delivering mixed messages.

While China’s HSBC PMI Manufacturing rose to 50.4 from 50.2, indicating an uptick in growth, what failed to inspire was the key output component slipping to a five month low and HSBC saying "while manufacturing likely stabilized in October the economy continues to show signs of insufficient effective demand". Cue more calls for more stimulus.

After a positive European close on hopes of more ECB stimulus outweighing worries over bank stress tests results (this Sunday) and strong Q3 releases by Boeing and Dow Chemical, sentiment was later overshadowed by shootings in Canada’s capital while futures were kicked further by AT&T results missing estimates and it lowering its revenue outlook.

Note Tesco results this morning have it abandoning its FY outlook after a weaker than expected Q2 (underlying sales -5.5%) and more announcing a bigger black hole than thought (£263m vs £250m est) on accounting irregularities. Another episode of “Not Tesco’s finest day”. Credit Suisse has also said that Q3 profits more than doubled as trading volumes rose on volatility (good news for UK banks ahead of earnings season?).

In focus today we have a raft of data including October preliminary French, German and Eurozone PMI Manufacturing & Services which are all seen giving up a little ground in October, in-line with the recent poor run of data and economic travails the region faces. UK Retail Sales seen flat in September (down including autos).

US jobless Claims expected to tick back up from last week’s lows, while US House Prices edge higher but US PMI Manufacturing creeps back a notch and Eurozone Consumer Confidence deteriorates further. Q3 results out from key economic growth indicator Caterpillar before the US open, with tech/internet giants Amazon and Microsoft after the US close.

In commodities, safehaven Gold trading $1240-1245 supported by a mix of physical demand and economic uncertainty. Oils back near recent lows although found some support after US inventory report.

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