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

UK 100 called to open +40pts at 6470 with reduced threat of imminent military intervention in Syria as discussions between world leaders and the UN security council continue and action delayed, thus boosting risk appetite and helping US markets to close higher and Asian bourses to deliver a more  positive session overnight after a tough week.

Asian equities seeing some welcome calm with Japan’s Nikkei the outperformer after Morimoto said BoJ ready to make necessary policy changes to maintain growth but still optimistic. Data-wise, Japanese retail figures missed (first annualised drop since April), supporting need for continued easing to maintain consumer-led recovery and keeping questions of Abenomics alive.

In Australia, New Home Sales plunged in July, but Private Capital expenditure rebounded strongly reinforcing speculation the RBA’s easing cycle could be near an end. Quantas Airways results saw the company register a return to profit and the shares gain almost 10% which could help with sentiment on the sector which is impacted by higher fuel costs.

US stocks rebounded, recovering some of their recent losses helped by oil producers (major index weight) leading the gains as the price of US Crude settled as more than a 2-yr high of $110/barrel (Brent at 6-month highs) on the possibility of supply disruption in the Middle East.

In focus today will be Spanish GDP at the market open with any change to the final figure being of interest for Eurozone sentiment. German Unemployment seen pretty much unchanged. The ECB’s Nowotny and Rehn are talking and may mention interest rates impacting the EUR.

In the afternoon, US GDP (2^nd est) seen delivering an upward revision at odds with some of the consumer confidence readings of late, and Personal Consumption a tough lighter. US Jobless Claims seen stable around the level of the last two weeks. The Fed’s Bullard and Lacker speak in the afternoon/evening which could impact market sentiment on QE3 taper.

Vodafone confirms in talks to sell stake in Verizon Wireless to partner Verizon. Long running story, and JV makes up big chunk of VOD market cap and a move to sell could open up possibility of big special dividend for VOD shareholders. Been here before though and nothing happened. Shares weak recently – designed to support share price?

UK 100 rebounded to regain 6470 level as we write with rising support around the 6400 level. Resistance lies ahead at the trendline of August falling highs at 6475. The concerns now is that while geopolitical tensions might have calmed, markets will likely waste no time in refocusing on the prospect of reduced US monetary stimulus. While still in August downtrend, failure to retest 6350 is a positive. Breakout at 6475 bullish, breakdown at 6400 bearish.

In FX, USD Index testing its trendline of falling highs since mid-July at 81.5, which could lead to a breakout and upside to 82.0 and then 82.5, as demand for the greenback returns and begins to move in the direction one might assume given the prospect of September tapering of Fed stimulus.

GBP/USD trading around 1.55 after dovish tone by Carney and renewed demand for USD. Still showing falling trend from 21 Aug, testing the trendline of 2013 falling highs which it break out above on Aug 15. After a venture below the 200-day MA yesterday, it is serving as support for now and note 20-day MA broken up through 200-day. EUR/USD broken down below 1.33 opening up downside to 1.32 August lows. Demand for USD, or talk of ECB rate cuts to maintain regional growth?

In Commodities, Gold back of its best levels of $1435 as safehaven demand takes a breather on news that Syrian intervention not imminent. Support likely at $1400 with trendline of rising lows from Aug 7. Upside still possible to confluence of resistance around $1500 via multiple long-term trendlines as interest is renewed in the yellow metal after spending much of the year out of favour.

Oils’ off their spike levels, with US Light Crude back below $109 (from $112) but Brent holding up better at $115 (from $117) on the possibility of supply disruption.

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