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

  UK 100 called to open -20pts at 6430 with Asian markets lower overnight despite a positive US close on Friday. Sentiment still dampened by US uncertainty as the partial government shutdown moves into its second week and the more troubling debt ceiling (17 Oct) nears. How long will this drag on for? Only the politicians know.

 The congressional stalemate shows no signs of progress with House Speaker Boehner adamant that a clean spending bill will not be approved while Treasury Secretary Lew says congress is playing with fire putting the nation’s sovereign reputation at risk, on top of President Obama’s highlighting of the potential impact on Q4 GDP.

 There are also fears that October could be a lost month for important official US macro data meaning November lacks a comparable and pushes analysis into December, possibly even January. Rating agency Moody’s says US default extremely unlikely with debt payments being made even after the deadline.

 With the Fed/markets using data to decide/price in policy changes and tapering, the waters may still remain muddied even after a budget/debt ceiling solution. Fed speakers still making noise (stimulus for longer, can’t counter fiscal uncertainty).As we said on Friday, sovereign uncertainty no good, but no tapering until 2014 is risk positive.

 Away from the US, the World Bank cuts its 13/14 forecasts for China and most of developing East Asia, although the region will ‘continue to power global growth’, an important point while China et al. are under the microscope in terms of global growth contribution. Elsewhere, IMF cut Ireland growth on outlook risk and debt sustainability.  New Zealand’s Fin Min said the NZD is too strong, hindering exports.

 In focus today, we have a still limited data slate on account of the absence of US data we really only have Eurozone Sentix Investor Confidence which is seen improving quite substantially. Bar that, we have only ECB members speaking after Draghi’s less dovish than expected comments of last week. Any divergent views?

 UK 100 back at rising lows from Thursday, with a bounce off 6430 and resistance at rising highs and October’s best of 6485. Unfortunately, only a major US announcement likely to be the driver of a break-up or down.

 In FX, USD Index strengthened to above 80, breaking out from falling 8-day channel despite US government stalemate, but is back at the breakout level. Support 80.1? GBP/USD weakened back to 1.60 from recent 1.625 highs. Major multi-year trendlines served as hurdles again. Likely strengthened, especially if USD found support. EUR/USD off its best 1.365 but up from overnight lows at 1.354.

 Gold still refusing to conform to safehaven status. US nothing to worry about. Sideways at $1315. Falling highs a hurdle at $1330.

 US Light Crude oil back from recent $104.5 to test $103, while Brent still hindered by falling 1-month highs at $109.6. Trading sub $109 as we write despite renewed clashes in Egypt overnight which could unravel recent Middle East calm.

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