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

UK 100 called to open +25pts, with Asian markets in positive territory (even China) helped by a positive reading (>50) from the Chinese MNI Flash Business Survey, which helped improve sentiment towards an important emerging nation which is staring down the barrel of slowing growth, and maintained the rally following very positive macro data from the US Philadelphia Fed.

This helped undo the poor reception to the Bank of Japan (BoJ) joining the quantitative easing party, where European Central Bank ECB) and US Federal Reserve (Fed)-induced rallies had taken markets back to March-highs.

Futures also helped overnight by reports that EU officials are working with Spain to craft an economic reform programme which could be unveiled next week, and put in place before the country requests help from the European Stability Mechanism (ESM), the region’s bailout fund. This would be aimed at pre-empting the type of conditionality likely imposed on the nation by the International Monetary Fund (IMF), in return for aid, to show its commitment.

There is however, counter-talk that the Spanish PM Rajoy remains reluctant to ask for help given the lowering borrowing costs his country now faces (sold 10yr bonds at lower interest rate of 5.7% vs 6.7%) thanks to the European Central Bank’s (ECB) recent sovereign bond market intervention pledge, and fears that conditionality from lenders may be too tough and send it down a Greek-like path.

There are also suggestions that Rajoy wants to delay any request until after next Friday for the result of the country’s banks review in order to know how much the sector requires from the ESM in order to be recapitalised. All the while, the regions’ political tensions remain highs with autonomous regions wanting help from Madrid but with no conditions attached (sounds very similar to Rajoy’s stance) and/or the right to raise taxes.

While markets rallied, gloomy macro data was a plenty with awful French PMI data, although Germany did improve. Italian GDP growth has been revised down significantly, again. Irish GDP collapsed, but it did avoid recession. US jobless figures will keep Bernanke’s QE3 on auto-fire. Eurozone consumer confidence fell back, although US Philadelphia Fed manufacturing showed an improvement in September, and the six month outlook was extremely strong.

Today, the macro calendar is light with the main event being UK Public Finances and expectation that August shows a borrowing figure of £13.2bn, which doesn’t help with the UK chancellor’s debt reduction targets. However, the front page of the FT runs with a story that Bank of England (BoE) governor Mervyn King has given his blessing for the coalition’s self-imposed 3-yr debt reduction plan to be extended, should there be a genuine need, such as the troubled economic outlook of now. Short term politics vs. longer term economics/business.

In the Commodities space, Gold continues to top out around $1780 while the dollar bottoms out versus the GBP and EUR. The key oil prices US Light Crude and Brent Crude have bounced off yesterday’s mid-morning lows after the improvement in risk-appetite.

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

• Aussie              Conf Board leading Index       No growth
• China               MNI Flash Bus Sentiment        Improved, back above 50
• See Live Macro calendar for all details

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

• AngloGold workers strike at S.African mine
• HMV says underlying sales continue to slump
• Sage buys EBS and Cenize in Brazil
• Faroe Petroleum buys field, pipeline interests for $32 mln
• British Land sells seven foodstores
• Sirius Minerals surrenders Australia interest
• African Eagle upgrades Dutwa resource