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

UK 100 called to open -40pts at 6470 after 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.

Markets also reacting to a CNBC report that Larry Summers will be named new Fed Chairman within a few weeks. He’s more anti-QE3 than Janet Yellen, current vice chairperson at the Fed and another strong candidate. Overnight, China Industrial Profits growth held firm in July and Japanese small business confidence improved.

A Chinese PBOC official said the effects of Fed tapering may be discussed at the G20, suggesting far reaching effects, notably on emerging markets, is generating concern for the word’s #2 economy on which all eyes are focused for supporting global growth. Ratings agency Moody’s has said reforms are the key to success of Japan’s Abenomics and that the Eurozone continues to improve but is unlikely to reach pre-crisis GDP levels in the medium term.

In focus today will be the August IFO surveys for confirmation that Germany is still making ground the region, even if the recovery is uneven. US House Prices for June seen similar to May, possible the latter stages of improved consumer sentiment before fears intensified (taper, debt ceiling, interest rates, market volatility), evident in expectations for a fall back in the Consumer Confidence reading. Richmond Fed nonetheless seen improving.

Later in the week German inflation seen falling back countering recent comments that improved data ruled out the prospect of an ECB rate cut. US GDP (2^nd est) seen delivering an upward revision at odds with consumer confidence such as today’s reading, Friday’s Uni of Michigan print and lower prints on income/spending. BoE Governor Carney gets a second chance to make a first impression on forward guidance after leaving markets unimpressed/unconvinced earlier in the month.

Friday is the busy day with Eurozone sentiment seen improving, inflation mixed (core up, headline down), unemployment unchanged but German Retail Sales rebounding. In the UK, mortgage approvals seen better than the BBA figure of last week Japanese data seen largely improved (inflation, industrial, spending) soothing concerns on the effectiveness of Abenomics and fears over impact of sales tax hike on which debate continues.

UK 100 back off its best levels of 6525 last week and back at the 6460 level from which it finally broke out on Friday. Trendline of falling highs can now be drawn from early August. Add in one from highs of mid-July below lows of August and we have a falling channel. Possible downside to 6350  recent bounce if 6450 doesn’t hold, maybe even lower. Beware combination of end-of-summer, end-of-month, taper fears and geo-political tension which may offset any good growth data.

In FX, USD index pretty much unchanged around 81.5. Unable to break falling highs from mid-July.  GBP/USD declines slowed up at 1.554, with 200-day MA and falling 2013 trendline still offering support although MACD just registered bearish cross. EUR/USD back around 1.335 mid-point of last two weeks. Support still 1.33. Fight between US tapering and Eurozone recovery.

In Commodities, Gold regained $1400 likely on safehaven demand more than anything given the geopolitical tensions and despite stronger USD. Unless markets factoring in more inflation needing a hedge. Support $1350. Upside still possible to $1500 grouping of multiple long-term trendline.

Oils’ still buoyed by geopolitical tensions with US Light Crude countering global growth worries, trading around $106 even if off early-week highs of $107. Brent Crude still benefiting more from supply concerns on Middle Eastern unrest (Syria, Egypt) remaining near recent highs $111.5.

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