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

  UK 100 called to open -40pts at 6425 as the global rout continues with heavy US equity losses (worst since June) following a big ISM Manufacturing data miss which stoked fears of a US slowdown and a warning from US Treasury Secretary Lew about avoiding another debt ceiling pantomime which added to the existing emerging markets (equities + FX) pressure from the worries of taper-induced outflows, political unrest and a slowing the world’s #2 economy China.

 After the US close, the Fed’s Fisher reiterated his “financial market declines” do not change FOMC’s taper decision, with their focus being on the real economy. Note Japan’s Finance Minister Amari saying investors over-reacting to Fed tapering.

 In Asia overnight, stocks well in the red, taking the negative lead from Wall Street, with Japan’s Nikkei and TOPIX nursing significant falls (>4%), continuing to unwind the QE-infused gains of last year. Note Hong-Kong listed PC maker Lenovo fell the most since 2009 after downgrades by 5 brokers with acquisitions seen having a negative impact on profits in the near-term.

 Australia’s ASX hit by global sentiment but also dented by the central bank RBA leaving rates on hold and appearing to lock the door on any more rate cuts which saw AUD jump.

 Note IMF head Lagarde calling for more central bank cooperation citing the threat of turmoil spreading through the global financial system given the now hyper-connected world and being mindful of the impact of their policies. ECB President Draghi is also reportedly considering ending sterilization of SMP holdings (offsets loss of market liquidity to keep rates down).

 There is also a report circulating that European banks have $3tn exposure to emerging markets (4x that of US banks) putting them at more risk. This could be a real headache ahead of the ECB’s AQR stress test of the regions banks.

 In focus today we have UK PMI Construction seen giving up a little ground but remaining well into growth territory. After recent worrying CPI data from the Eurozone, the PPI is seen getting back positive in December.

 In the afternoon, US ISM New York will be watched for any similarities with the print that spooked the markets yesterday. US Factory Orders are seen week in December likely impacted by the weather while US Economic Optimism is expected to have waned a little. Fed speakers include Lacker and Evans.

 Note results out is morning from ARM Holdings with revenues +15% and profits +19% profits, meeting Q4 consensus helped by license sales offsetting slower royalties growth. Ocado has posted a wider loss than last year but says well positions for this year. BG Group revenues also in-line after last week’s 2013 Egypt impairment charge and 2015 production output warnings.

 The UK 100 ’s overnight weakness has taken us all the way to test below 6400, which makes it a full 6.8% retrace of the Dec/Jan rally. Calling the bottom may still be bold unless you consider all the bad news to be out in the open. Many thougth it was before the US data spook yesterday. Sentiment still very much under the cosh.

Gold back above $1250 after a renewed round of safehaven seeking following the US data and the corresponding weakening in the USD Index. Potential falling highs of last week with resistance around $1265. The yellow metal still out of favour as a safe port in a storm after so many got burnt last year.

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