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

UK 100 called to open -40pts at 6400 with Asian markets down for a second day with a real possibility of imminent military action by western allies against Syria’s Assad regime’s alleged use of chemical weapons, adding to hitherto summer uncertainty over timing of Fed tapering of QE3 (US data supportive yesterday), signalling the beginning of the end of the loose monetary policy markets have become attached to.

Geopolitical tensions in the Middle East have sent the prices of oil and gold higher, the former to 6-month highs on supply concerns, the latter to its best in 3-months on renewed safehaven demand, while the broad emerging markets sell-off and reversal of capital flows initially triggered by QE continues. Ratings agency S&P said emerging markets likely to see weaker currencies.

Japan has officially moved the Fukushima leak to a level 3 on the international scale while on macro data front South Korean business surveys and Australian house affordability improved but construction work down-under remained weak. German import prices were flat on the month but remained weak on the year, reducing inflation pressure, while Consumer confidence ticked back.

In focus today will be the situation regarding Syria, otherwise amid a rather light calendar including just UK Trades Balance (seen improving) and US Pending Home sales (seen flat) it’ll be BoE Governor Carney’s second bite at the forward guidance cherry. Can he deliver his message more clearly this time? Can he make markets believe a rate rise won’t come earlier then H2 2016, knock-out clauses are not to be feared and the inflation target is not now 2.5%?

Brent Crude oil up to a 6-month high uncertainty on the outcome a Monday bank holiday, giving up its breakout gains of Friday on a combination of concerns regarding Fed tapering of its bond purchase programme and the prospect of coordinated western military intervention in Syria. Bourses in Asia lower across the board on heightened geo-political tensions and the weaker than expected US Durable Goods data yesterday.

UK 100 back below the 6420 level of anticipated support yesterday. This has reverted to resistance overnight. Downside still possible to last week’s low of 6350 as instability returns on a global scale (tapering + geopolitical). August falling channel intact but upside likely capped early at yesterday’s key resistance 6460.

In FX, USD index upside still capped at 81.5 by trendline of falling highs from mid-July. Emerging markets sell-off seeing US treasuries being dumped in attempt to combat weakening of emerging FX, adding to the yield rise from taper fears but also flooding market with USD. GBP/USD declines now back flirting with the trendline of falling highs which we broke above mid-month and testing 200-day MA. EUR/USD stable around 1.34 helped by better regional data outweighing continued easy policy stance from ECB, but is upside limited?

In Commodities, Gold continues to tick higher on safehaven demand while USD remains under pressure (see above) reducing the Greenback’s traditional safe-port-in-a-storm status. Support now likely $1400, and a rise to $1450 looks very feasible if geopolitical tensions continue to escalate. A confluence of resistance around $1500 via multiple long-term trendlines may slow things up.

Oils’ spiked to mult0month highs on geopolitical tensions and related supply fears with US Light Crude testing $112 and Brent Crude $117.

 For any help you may require placing trades or in terms of market information, put a call in to our trading floor – all part of the service.