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

  UK 100 called to open +5pts at 6523, after US markets closed in the red and Asia gain put in a mixed session, with QE3 taper timing talk from Fed officials continuing to weigh on sentiment, although the index is off its worst levels after a deluge of macro data overnight.

 Much debate continues on the forward guidance provided by the Bank of England’s (BoE) new governor Carney. While he pledged to help the economy by saying rates will stay low until mid-2016 when unemployment is seen falling to 7% (still a tall order), this was offset by a trio of caveats/knock-outs such as inflation >2.5% in next 18-24 months (very possible) seeing markets price in a rate hike even earlier then they had been. Although like the Fed, levels not triggers, rather thresholds for consideration.

 Both Fed and BoE now using dual mandate of inflation and unemployment (ECB to join club?). And both trying to manage expectations as economies recover but remain addicted/unconvinced they can survive without loose policy. The Fed is trying to stop asset bubbles from assumption that QE3 is here for longer (timetable destined to be changed) by putting doubt into when the programme will start being scaled back. The BoE is trying to boost sentiment and keep economy going while a rate hike could be just round the corner. Carney has put his ad the Old Lady’s credibility on the line.

 While Japanese Current account data disappointed, lending data was solid. Aussie jobs data was mixed with the unemployment rate improving on lower participation, something we have seen in the US and the UK debating statistic flattering zero-hour contracts. Australian equities positive nonetheless, while Japan’s Nikkei is back in the red after the BoJ left policy and economic assessment unchanged, with no new easing measures seeing the USD/JPY continue to strengthen.

 The big data that has got markets off their worst levels those was Chinese Trade Balance which showed much better rebound in exports and imports growth suggesting growth both domestically and internationally, although the former likely adds to global economic recovery thesis and thus tapering/rate hike fears. German Trade Balance benefited from drop in imports and less of bounce in exports.

 Ratings agency Fitch has maintained Germany at AAA and stable outlook not seeing developments in the country leading to a ratings change. It has also been denied that Chancellor Merkel would resign in 2016 if re-elected in September. In Portugal, the Treasury secretary resigned  after controversy involving sale of toxic swaps.

 In focus today will be the Spanish Industrial Production which, via a less bad rather than better print, could provide a fillip for Eurozone sentiment. US jobless claims as watched as ever. Can they continuing claims stay sub-3m.

 The UK 100 pulled all the way back to near the mid-July of 6480 as suggested, and the overnight bounce has seen a recovery to 6540 – support for much of later July. That’s the 3% correction from recent highs. Enough? Or more to come?

 In FX, GBP/USD up at 1.55 with BoE forward guidance trumping Fed taper talk. June highs of 1.57 and breakout 1.54 are the level to watch. EUR/USD maintains uptrend to test 1.335. Watching June highs 1.34. USD/JPY below closing on 96. USD Basket (vs. majors) down at 81.2. June lows 80.6.

 In Commodities, Gold off worst levels, but still under pressure with $1300 likely a hurdle. Oils also show trend of falling highs as resistance.

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