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

  UK 100 called to open +40pts at 6570 after positive US close and bullish handover to Asia, helped by – wait for it – poor US data (ISM Manufacturing in contraction) reducing recently heightened fears the US Fed could taper its QE3 asset purchase programme soon, seeing the USD sell-off further and helping commodities.

 Japan’s Nikkei the outperformer in Asia, benefiting from speculation of a government official urging pension funds to increase equity holdings and overseas assets, as well as  a weaker USD/JPY (back to 100) overnight.

 Australia’s RBA left interest rates unchanged but maintained a bias towards easing (but no rush to do so) in its policy statement, helping the ASX Index stay in the green. China still hindered by yesterday’s poor/mixed PMI data.

 Note Europe’s negative close (although off worst levels) despite better (bit still weak) Eurozone PMI Manufacturing readings (periphery + core), with the IMF’s cut to Germany’s GDP forecasts on regional uncertainty denting sentiment.

 Markets still very much driven by sentiment towards US growth and stimulus, and note Fed member Lockharts’s comments that any decision to taper QE3 could come in coming months on improved data, but balanced this by saying deflationary fears could see the Fed intervene again (something we have discussed recently; tapering yet to be quantified and can be reversed).

 With the Fed’s asset purchase programme focused on jobs market, note also the extent to which markets are swaying on non-employment data such as ISM, the index’s employment component also weak and is likely monitored. Official jobs data still likely more important.

 Don’t forget Friday is US Non-Farm Payrolls. Anything above 170K consensus (or a big upward revision to last month) could revive taper fears, yet again. A similar situation to the UK – employment improving but output still under pressure – mind the gap.

 Overnight macro data included better UK BRC Retail Sales and a better narrowing of the Aussie Current Account deficit, while China’s MNI Consumer Sentiment ticked up.

 In focus today, amid a quiet macro calendar will be the UK PMI Construction update (seen edging up, but still in contraction) and US data back to the fore in the afternoon, with ISM New York of interest after Friday’s strong Chicago Fed Manufacturing Index as well as IBD/TIPP Economic Optimism – both of which could sway QE taper fears again.

 UK 100 found a modicum of support at lows of 6512 and overnight have rallied close to yesterday’s midday highs. Double bottom? 3-month graph shows potential for uptrend to resume. Shorter term graphs still a bit negative.

 In FX, GBP/USD benefited from revived QE3 taper fears, regaining 1.53 and almost testing 1.54, but off best levels overnight. Same for EUR/USD which is still volatile but also still in short-term uptrend with 1.31 tested yesterday evening. USD/JPY weakened again with rebound from 99 to regain 100.

 Gold regained $1400 on weaker USD, but failed to test Friday’s high of $1420. Oils rebounded from 1-month lows with US light Crude back at $93 and Brent at $102.

 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.

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

• Wolseley says UK, U.S. growing well, Europe weak
• Active Energy eyes purchase of Nikofeso Holdings
• Chinalco arm, MMG said to pursue Glencore’s $5bln Peru copper mines
• AstraZeneca drops Rigel rheumatoid arthritis pill
• New Look swings to small profit
• Vodafone looking at Kabel Deutschland again