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

UK 100 called to open -15pts, with Asian markets taking another negative lead from the US on increasing concerns over the global economic slowdown and following ratings agency S&P’s two-notch downgrade for Spain to almost junk, and with a negative outlook. Note that we are still waiting for Moody’s to deliver the results of its review of the next Iberian bailout candidate.

The IMF meeting continues to provide newsworthy comments regarding global growth along with Lagarde calling for Greece to be granted an additional 2 years to meet optimistic budget targets. The Bank of Japan’s (BoJ) latest minutes suggested potential for further easing/asset purchases, while the Bank of Korea (BoK) cut rates as expected.

S&P’s downgrade of Spain focuses on a depending recession, rising unemployment, spending, regional friction cuts which overall is limiting the options available to PM Rajoy’s government. It also suggested potential for another cut if Eurozone support fails to keep sovereign borrowing costs down.

US markets failed to be supported by the Beige Book highlighting modest expansion in September economic activity after a gradual improvement in the last report, with the key employment metric showing conditions were pretty much unchanged. Q3 earnings outlook from Alcoa still weighing on sentiment, with its gloomy outlook denting confidence and supporting global slowdown fears. What will JPMorgan and Wells Fargo deliver tomorrow for the banking sector?

Overnight, Australian employment data provided a conundrum with employment up on the month, but unemployment also up. Japan Machine Orders were worse, supporting slowdown fears on Asia, while Consumer Confidence dipped. German inflation data in-line with prior reading, flat for the month, up 2% on the year in-line with ECB price stability targets.

Look out for the debut of Direct Line insurance in London this morning. The IPO has been priced at 175p/shares, valuing the company at £2.6bn, one of the biggest open to the retail investor for 5 years. Valuation could also cause ripples in insurance sector. BAE Systems shares also likely in focus after failed negotiations with European peer EADS. Where next? Does merger talks suggest future standalone less viable?

In FX and Commodities, GBP/USD remains down around the 1.60 level with risk aversion maintaining interest in the safehaven greenback.  EUR/USD tested lower overnight (sub 1.283) after S&P downgrade dented EUR, and remains in week’s downtrend. GBP/EUR benefited from EUR weakness to regain week highs of 1.246. Gold remains off its recent highs on dollar strength, although looks to have some support around $1760. The same is true of Silver, finding support around $33.7. Oil sees US Crude off week highs on growth fears, but Brent made new highs driven by geopolitical risk.

Today’s focus will be on US Weekly Jobless figures, for any confirmation that things are improving in-line with the recent Non-Farm Payrolls (NFP). Could we start to see a big improvement in continuing claims after drop in unemployment rate? JOLTS jobs openings missed expectations yesterday. US Trade deficit seen worsening a touch on 0.7% growth in import prices. Lastly, the US Oil stocks could be of interest to oil traders with some volatility of late, thanks to global slowdown fears tussling with negative geopolitical drivers.

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Overnight Macro Data: (Source: Reuters/DJ Newswires)

• Japan               Machine Orders                                  Worse
• Aussie              Employment                                        Mixed
• Aussie              Consumer Inflation                             Higher
• Japan               Consumer Confidence                        Declined
• Germany         Consumer Inflation                             In-line
• See Live Macro calendar for all details

UK Company Headlines: (Source: Reuters/DJ Newswires)

• Ashmore says assets rise to $68bn
• Synergy Health says H1 trading in line
• Burberry Q2 comparable store sales growth slows to 1%
• Rangers F.C. to raise £20m in London flotation
• Balfour Beatty wins U.S water contracts
• Greggs says LfL sales to remain negative this year
• DS Smith says synergies from SCA packaging deal to reach €100m in year three
• Condor Gold acquires extra concession in Nicaragua
• Direct Line IPO price set at 175p/share; directors take 0.3% stake; retail investors buy 15%
• E2V Tech issues warning on defence slowdown
• Chariot Oil acquires stakes in Moroccan licences
• BAE warns of disruption ahead in U.S. market
• Ferrovial’s BAA says Heathrow passengers rise
• Monitise says trading remains strong
• WH Smith CEO Kate Swann to step down next year
• WH Smith FY pretax profit £102m vs £93m