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

UK 100 called to open -5pts at 6430 despite Asian markets reversing earlier gains to trade mixed with US political inactivity regarding the budget and debt ceiling still holding markets from moving one way or the other as the impasse on the former clears its first full week and the deadline for the latter closes in.

China and Japan very vocal critics of US stalemate at a meeting in Bali (President Obama not present) given their big holdings of US debt, and that they thinking about the risks of a resulting decline in the value of US Treasuries. Fed’s Fisher said default not an option but sees debt ceiling talks going to the wire (surprise surprise).

Japan and Hong Hong higher but Australia in the red despite positive macro data from down under. Japan boosted by positive Eco Watchers surveys which offset smaller than expected current account and trade balance figures. Regional sentiment buoyed by China Services PMI remaining solidly above the 50 level demonstrating solid stabilisation.

While the UK debates whether the government is fuelling a dangerous house price bubble with the Help to Buy scheme launched today, overnight data showed RICS house price balance improving to its highest level in a decade. ‘Help to buy’ should be ‘Help to build’ with lack of housing stock the real issue.

UK BRC Shop sales slowed in September, while the British Chamber of Commerce sees the UK growing at its fastest pace in five years in Q3 (0.9-1.0%), giving hope if a recovery gathering momentum. Some good news but which could fuel bigger house price bubble.

 In Europe, interesting FT article talking about EU bank stress tests penalising those remaining reliant on the ECB cheap LTRO funding avenues (must factor in higher normal funding costs), which is at odds with helping the smaller actors which will likely need support for longer than the big guns.

In focus today, we have German Factory Orders which are expected to show a reversal from their July weakness. The IMF also updates on World Economy, with it likely that growth expectations are trimmed mirroring the action of the World Bank on China and most of East Asia over the weekend and G20 saying global recovery still uneven, and that still too soon for central banks to exit unconventional policies.

In the US, with the lack of US official data, all eyes on anything from private sector/industry. NFIB Small Business Optimism seen flat, IBD/TIPP Economic Optimism seen taking a step back from Sept while JOLTS Job Openings albeit without consensus will be of interest given the importance of the labour market readings. Note talk of Obama could now be leaning towards former vice Chairman Donald Kohn as new Fed chairman when Bernanke leaves.

UK 100 still sideways within 6385-6485 range. The hundred point question is which way do we break? Unfortunately it’s US politicians who have the answer.

In FX, USD Index still hovering around 80-80.2 just about holding outside the recent falling channel and above the falling trendline since mid-September which may now serve as support at 80. GBP/USD bounced of 1.60, but failed to regain 1.61. EUR/USD sideways at 1.355.

Gold a touch higher at $1326, toying with the trendline of falling highs since late August. Acting a little more like a safehaven, but could technicals hinder any further progress?

US Light Crude oil solid around $103.5 but Brent making a break above recent falling highs at $109.5.

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