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

UK 100 called to open -10pts this morning at 6,560, where we started yesterday, with sentiment still held back by uncertainty surrounding the Fed and its eventual QE3 tapering, US fiscal discussions (budget, debt ceiling) and disappointing macro-economic data (consumer confidence, Richmond Fed) which saw US equities close mostly lower and Asia deliver a mixed session.

While Iran offered hope of nuclear transparency at the UN and Obama welcomed this whilst also demanding positive statements be followed up with positive actions, there was no exchange between the two leaders which, along-side poor US macro data, outweighed better US house prices and easing in Middle East tensions.

Back to the Fed, and there is an investigation into unfair dissemination of the no-taper announcement by news agencies, with some big trades being placed impossibly early (faster than speed of light by fibre-optic cables?) if made in reaction to the scheduled release.

Down under, the RBA Financial Stability Review pointed to a strong Australian financial system but cautioned that banks must not drop standards in terms of new business quality in order to maintain profitability.

In M&A, Applied Materials is set to buy Tokyo Electron for $9.4bn in the largest deal for a Japanese company from outside the country in six years.

In China, its Beige book suggests a slowdown and the PBOC pumps more cash in as a new credit squeeze emerges in rising interest rates on the mainland. Ratings agency Moody’s says failure to raise US debt limit would worsen outcome for financial markets than a government shutdown from budget impasse.

Overnight data of note included a slight improvement in German Consumer Confidence, for the fifth month in a row to reach the highest level in 6 years. Good news for the Eurozone core as the country begins potentially prolonged coalition negotiations with some fierce resistance from the opposition.

In focus today we have UK CBI Reported Sales seen falling back in September. IN the afternoon, we have, alongside some ECB speakers (who downplayed another LTRO yesterday), the august update on US Durable Goods Orders which are seen around flat after last month’s surprise weakness. US New Home Sales are also seen rebounding after weakness in July.

UK 100 sideways since support found yesterday morning. 3-month uptrend intact after breakout from falling channel. Currently in narrow range 6550-6585.

In FX, USD index continuing to edge higher, regaining 80.7 on taper delay. Rising support at 80.6. GBP/USD back below 1.60 on USD strength. EUR/USD also maintains falling trend towards 1.345 from recent highs 1.355, on USD strength following no taper.

Gold just hovering around $1320 hindered by stronger USD and prospect of rising interest rates, less need for safehaven and no help from prospect of China’s Golden Week holiday.

Oil seen US Light Crude back above $103.5 while Brent Crude up above $109, both off worst levels post no-tapering.

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