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

UK 100 called to open -40pts, with China and Japan’s island dispute having an impact on the latter’s auto production in the former, with sales affected by negative sentiment towards its neighbour. This added to the sell-off in futures after the European close, brought about by a raft of negative headlines from the eurozone (we mentioned intensification of worries yesterday) which maintained the current market correction post central bank action, and doubts over the global economy.

European Central Bank (ECB) official Asmussen rejected the idea of the ECB erasing/haircutting its Greek debt holdings (if you do if for one, you’d have to do it for others). Greek news reported that the International Monetary Fund (IMF) might stop further disbursements of aid to Greece until new debt restructuring agreed on (Troika left Athens for break after Greece failed to find new cuts). Spanish region Catalonia (20% of Spain’s GDP) has called a snap election, a quasi-referendum on independence, adding to worries about the nation (looks set to overshoot crucial deficit goal) and its surely overdue bailout request.

A German-led meeting with finance ministers from Finland and Holland discussed new debt structuring via the new bailout fund European Stability Mechanism (ESM) only applying to new cases (sorry PIGs? Does Spain count?). After German Bundesbank President Jens Weidman voted on his own against Draghi’s unlimited bond buying plan, he added that he can’t be the only member of the decision making group one with doubts over the effectiveness/legality of the intervention (funding states?).

If you’re after good new, it’s thin on the ground from a political sense, although macro-wise US Consumer Confidence rebounded much more strongly than expected. A rare bright-spot. Whether optimism has been boosted by the Fed’s linking of Quantitative Easing (QE) to unemployment yet is unclear, but the data helped UK 100 futures to two-day highs, however, this just set it up for a pullback from an 8-day trendline of falling resistance, part of a correction we still see going to around 5760 before the longer term uptrend continues.

Overnight, messages from China remained mixed with a state researcher saying the economy would bottom in Q3 and rebound in Q4. This was countered by the central bank People’s Bank of China (PBOC) saying they would continue to implement prudent monetary policy while fine tuning it according to economic developments. So we’re still none the wiser whether it’ll make a big move or not. China taking lessons in delaying from Spanish PM Rajoy?

The macro calendar is sure to focus on UK CBI reported Sales which are seen improving from -3 to +5 in September, a sign on an improvement in the high street. The updated for figure for Trades Expectations will also give an idea of outlook. In the US, New Home Sales, a gauge of consumer sentiment, are seen at 380K in August, up 2.2% on the month. After last week’s sharp moves in the price of oil, US Weekly Crude Oil Stocks will be keenly watched. Away from macro data, we have debt sales from Italy, selling €9bn of 6-month bills and German selling €5bn of benchmark duration 10yr bunds.

In commodities and FX, Gold fallen back towards 1-week lows after the USD strengthened on the improved US Consumer confidence. The USD has begun to strengthen against the GBP post the QE3 announcement, with the GBP/USD pair testing lows of 1.615 after a week of sideways  action. The intensification of Eurozone worries has also seen the EUR continue to weaken against the USD, meaning a drop back in EUR/USD to pre-QE3 levels near 1.285. GBP/EUR continues its rebound off 14-month rising lows, reaching 1.26, on the resurgence in Eurozone fears.

US Light Crude Oil continues to trade lower (three week lows), closing in on the $90/barrel level on USD strengthening. Brent Crude has also weakened on the Greenback’s rise, but may find support at 2-day lows of $109 helped by geopolitical uncertainty.

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

• Aussie              DEWR Internet Skilled Vacancies       Declined again, but by less
• France             Consumer Confidence                        Worse
• See Live Macro calendar for all details

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

• Homeserve predicts H1 profit uplift
• Bahamas Petroleum says govt. to hold vote on oil exploration
• Sirius Minerals says seeing positive response to York Potash plan
• ICAP expects H1 revenue down 14 pct
• Domino’s Pizza confident on FY as sales growth continues
• Shepherd Neame FY profit rises on Spitfire, Asahi boost
• Topps Tiles says on track to meet consensus forecasts
• Liontrust Asset Management positive inflows increase
• Experian says pricegrabber unit still up for sale
• Porvair sees year profit beating market view
• IQE expects to meet full-year earnings expectations
• Wincanton wins contract with B&Q
• WS Atkins says outlook unchanged from August
• Bumi Resources to act swiftly to resolve financial probe
• Shanks warns on profit as solid waste markets deteriorate
• Numis sees second half revenues up on first half
• Imperial Innovations says PsiOxus begins vaccine trial
• Xstrata to shutter Australian nickel mine due to low prices, high A$
• TNK-BP co-owners to bid for entire BP stake-source