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

UK 100 called to open +5pts this morning at 6,565, with the index still sideways as markets sit tight ahead of next week’s 1 Oct deadline for the US budget and hopefully a weekend solution. More likely a last minute decision and merely short-term extension, but no guarantee even for that.  Thereafter, worries pass to debt ceiling and of course tapering.

US House Speaker Boehner insists no debt ceiling agreement until spending cuts, which are largely aimed at the Republican dislike of Obama’s Healthcare reforms, while the President is standing strong saying will not negotiate. Who’ll blink first? Who wants to be to blame for a government shutdown and negative impact on Q4 GDP?

Asian equities mixed again (but still heading for best month in 10 on global optimism) despite a positive lead from Wall Street with Japan lower as better than expected consumer inflation data saw the JPY strengthen and the finance minister said corporate tax rate must be considered from medium/long-term view.

China and Australia higher on the back of improved Industrial Profits growth in the former. The region also buoyed by improved US jobless claims suggesting recovery and despite lunge in Kansas City Fed and Fed’s George saying appropriate to taper on improved economy and failure to do so could undermine effectiveness of future policy. Peer Kocherlakota, however, said Fed should keep up current stimulus and possibly add more even if inflation > 2% target and outlook for gradual decline in jobless should trigger more.

Overnight, BoE Governor Carney stirred markets by saying would consider more QE should recovery falter, but didn’t see the point given recovery strengthened and broadened. This helped GBP/USD spike and comes at the same time as Chancellor Osborne looks set to give the BoE powers to cool housing market (which Osborne has stoked).

With Nationwide House Prices coming out ever stronger, and higher than expected, do we need more of a bubble message? Prices may be skewed to the south, but that doesn’t mean the bubble can’t burst.

It has been announced that the Royal Mail IPO (one of the biggest UK IPOs in years) expected to start 11 Oct with public applications welcome today until 8 Oct and shares to begin trading at 260-330p valuing the company at around £2.6-3.3bn  (6-7% yield).

In focus today we have the UK Lloyds Business Barometer which is Consumer confidence is anything to go buy should show an improvement. The UK’s Index of Services should also show a rebound in July. In Europe, Confidence figures seen improving slightly. German CPI seen flat in September, still below target.

In the afternoon, US Personal Income & Spending seen improved in August while consensus expects the weak to close with a climb by the Uni of Michigan Consumer Confidence.

UK 100 still sideways but narrowed to a 6540-6580 range. Given the break of 3-month rising support, good news that support building. However, support from uncertainty and lack of direction rather than optimism.

In FX, USD index weakened back to 80.5 in the middle of its 6-day range, but still down near multi-week lows on prospect of QE for longer. Fiscal headwinds also keeping lid on strength. GBP/USD benefited from BoE Governor Carney’s comments on QE (see above) to regain recent 1.61 highs. EUR/USD still hovering 1.35, much like Gold around $1320-1330.

Oil markets seeing US Light Crude stuck around $102.5 and near 1-month lows after big US inventory build and growth concerns. Brent Crude slightly more buoyant, up off lows but in clear 1-week week $108-110 range.

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