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

  UK 100 called to open flat at 6730, still holding above 6700 and in a narrow 50pt range as Asia’s main markets were mixed ahead of the Fed’s October meeting. This despite China’s PBOC relieving stress in the money markets by injecting cash. The problem was that it also steered interest rates higher signalling mild tightening to curb excesses (China in the red).

Indices/futures off their best levels ahead of the Fed’s 2-day meeting which is not expected to deliver any tapering move on account of data remaining unsatisfactory and the impact of the government shutdown. What will be key is what is discussed, which will offer fresh clues as to what central bank watchers need focus on through year-end. Note the Senate panel hearing for Janet Yellen to take the Fed Chair is on Nov 14.

 Overnight data included a rebound in Japanese household spending and retail trade, an improvement in the unemployment rate and small business confidence climbing back above 50. The Reserve Bank of India (RBI) also increased interest rates for the second time in 2 months and warning on elevated inflation for the rest of the year.

 US bourses closed mixed ahead of the Fed meeting, while Apple reported FY results which saw revenues beat expectations, helped by strong sales of recent new phone launches, and Tim Cook talk of returning more cash, but profits fell for the third consecutive quarter. Gross margin guidance also failed to please ahead of the key Christmas season. Maintaining innovation and profitability proving harder.

 In focus today we have UK consumer borrowing and mortgage approvals which are seen increasing in September. US Retail Sales are seen accelerating in September, while for August Housing price growth data is seen stable. In-line with the fall in Uni of Michigan consumer confidence, the official figure is seen dropping back in October.

 Results out this morning show litigation hurting UBS and Deutsche Bank. In the UK, Lloyds Banking Group kicked things off for the UK names, posting an 83% rise in Q3 profits, meeting expectations on an underlying basis although we have more PPI. Standard Chartered’s Q3 update said things tough. The rest of the bunch update over the course of the week. BP saw its underlying replacement cost beat guidance and hikes its dividend.

 The UK 100 sideways since last Thursday, in a narrow 6700-6750 range. This may be a pause before a resumption of the uptrend (Fed to deliver rally inducing words?). However, it could also be a sigh of waning momentum and a precursor to a correction. Support from multi-month intersecting trendline around 6700.

 In FX, USD basket rallied to 79.5 after finding support at recent 79.1-2 lows. GBP/USD off its best levels 1.62 after comments from the BoE’s Dale that expanding QE remains an option and that tightening will be slower than in previous recoveries. Big resistance at falling highs from Aug 2009. EUR/USD fallen back from best levels 1.3825. A move to 1.40 possible would require some very dovish comments from the Fed or something remarkably bullish/hawkish from the Eurozone/ECB

 Gold slowed up at $1360 as USD gained ground and as we suggested yesterday as the falling highs from mid-March limited further gains. The fall back adds to the weight of the trendline. Brent Crude rallied to $109.5 overnight a bi rebound, while US Light continued to creep higher to $98.75 as reports emerged from Libya that production had declined due to labour protests.

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