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

UK 100 called to open +40pts at 6615, with sentiment getting a boost overnight from a re-acceleration in Chinese growth in Q3 as well as a turnaround in US bourses after the debt ceiling deal and a results beat by Google. Note S&P back at all-time highs and Nasdaq near 13yr highs.

US optimism helped by some Fed speakers suggesting easy monetary policy should be maintained, although one was more hawkish despite economic uncertainty and the FT’s Fed watcher has said the Fed could still taper by December (we disagree) despite macro data being sabotaged by the government shutdown and analysts slashing US growth estimates.

Risk appetite also supported by Moody’s (the only silent ratings agency of late) saying a US downgrade from AAA stable unlikely in next 2 years. This added to relief after US resolution of its political and fiscal impasse (even if only delaying a potential re-run) and despite some lacklustre Q3 earnings.

China reported slightly faster Q3 GDP growth after Q2 slowed to a level worrying many, although fiscal stimulus being the helping hand to meet the slowest full-year growth target since 1990, rather than underlying growth. This is supported by Industrial Production, Retail Sales and Fixed Asset Investment slowing and could mean slowdown still ahead.

In Asia, Hong Kong and Australia equities healthily in the blue thanks to the Chinese growth acceleration (good for resources stocks) and the RBA governor talking down the AUD as helpful for the economy. Japan showing small losses despite S&P reiterating its AA- rating.

In terms of US Q3 Results in the US, GOOG shares jumped in after-hours trading to an all-time high after results beat estimates and despite key ad-business metrics continuing to diverge. Note also in the key banks sector Goldman Sachs hurt yesterday by lower trading revenues, which is a similar message to that from peers.

In focus today we have a very light slate with no real data of importance, as the US government gets up and running again and prepares us for a barrage next week of all the data it has been unable to publish over the prior 3 weeks. Fed speakers (pm) could provide comments on taper timing in light of government shutdown and debt ceiling can-kicking.

US Q3 results of more interest today in the US, with updates from Honeywell, Schlumberger, General Electric and the last of the major banks Morgan Staley. Note also that delayed US data to start emerging next week with Non-Farm Payrolls on Tuesday.

UK 100 futures rallied along with US markets to above 6600 and have maintained the level overnight after China’s improved data. The 1-month graph shows the index regaining the up-channel since 8 Oct with support at 6580 – a bugbear level since late September. Next hurdle Mid-September highs 6665, then early August highs 6705.

In FX, USD basket slowed up its declines around 79.75, but showing a desire to try lower than its current Feb lows. GBP/USD benefiting from weak USD to trade above 1.615 last seen in early-Oct before US impasse. 3-month high of 1.625 could be a hurdle. EUR/USD also jumped to 3-month highs of near 1.37. USD/JPY back down at 98 (from 99) as the JPY benefits from safehaven seeking over the USD due to likelihood of another impasse in the months to come.

Gold made a break above its falling highs since late August to trade $1320. Head & Shoulders bottom pattern and thus reversal? $1350 might prove resistance. Like JPY, benefiting from safehaven seeking and weak USD.

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