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

UK 100 called to open +15pts at 6450, making some progress (unlike US politicians; still no budget agreement; shutdown day 3), rebounding from its foray below 6400 and test of the 200-day moving average, to retest 6460 for the first time since late Tuesday. After a negative US close, Services data helping Asian bourses, although Japan is just in the red.

 Sentiment still not quite ignoring, but nor is it pricing in the worst case scenario (no agreement until debt ceiling deadline, possible sovereign default). Cautious optimism returns!

 Possible assumption that default won’t be allowed, but the longer the budget takes to sort out, the longer the Fed is held off from tapering. Happy days for easy money policy lovers and risk appetite.

 Obama has said will not negotiate (is the Democratic leader speaking to the Republicans as if fiscal terrorists?) to congressional leaders including House speaker Boehner. He also said Wall Street CEOs rights to be concerned, suggesting desire for pressure on Republicans.

 Overnight, data included a strong rebound for the Aussie Services index. Not back to growth (>50) yet but far closer than it was in August. China’s official non-manufacturing reading was much improved (6-month high) and gives hope of domestic demand/recovery, while manufacturing is a little light, suggesting lower demand for exports.

 Ireland has started off the Eurozone Services PMI run but with a deterioration. Expectations for the rest of the continent and the UK are for slight improvements and/or confirmations of flash readings.  Eurozone retail sales seen showing slightly better growth in August.

 Italian politics likely quieter today after Berlusconi backflip and Letta confidence vote survival.

 In the afternoon, official US macro-economic data likely not to be published on account of the US government shutdown.  So no jobless claims and Factory Orders. In their absence, all focus on Challenger job cuts and ISM Non-Manufacturing.

 Major company news this morning is BP winning a reprieve over Gulf spill payments. Welcome news while former allies testify against it about the failed capping process.

 UK 100 rebounded from lows to break above the falling highs from Friday. Also rising lows from yesterday with support at 6430-40. As for resistance, 6460 then 6485. Major US announcement likely needed to boost risk appetite markedly.

 In FX, USD Index stuck below 80. Even if 80 is regained, falling highs at 80.2 likely a hurdle. US budget and debt ceiling solution needed.

 GBP/USD stull flying high above 1.62, benefiting from weak USD, although progress held back by major multi-year trendlines. EUR/USD still holding 1.36 after Draghi’s boost to the single currency yesterday by not sounding as dovish as some expected and not announcing more help via LTRO.

 Gold back above $1300 after its technical sell-off on Tuesday. Finally received the email about the budget impasse and debt ceiling issue being good for safehavens like the yellow metal, especially when weak USD makes it even cheaper.

 US Light Crude oil rallied to $104 from $101.5 to make biggest gain in two weeks despite US stockpiles increased twice as much as expected. Brent followed suit, rebounding from 107.5 to $109.

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