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

UK 100 called to open + 10 points, despite Asian markets dragged lower as Goldman Sachs cut Chinese earnings forecasts on slowing growth, and Moody’s rating agency putting the EU’s AAA rating on negative watch.  Mario Draghi’s taster of ECB’s plan yesterday (buying three-year government bonds for distressed nations), has provided a boost in confidence in Italian and Spanish bonds (yields dropping).  Various meetings between Euro-leaders are scheduled for today.  The words of Chancellor Angela Merkel may be watched closely as the need for German co-operation in formulating any proposal would be paramount.  Italian PM Mario Monti and French President Francois Hollande could share views on the European Stability Mechanism.

UK retail sales for August fell 0.4% like-for-like, as the Olympics hit traffic at stores.  Excluding Easter, the British Retail Consortium had it as the weakest month since November.  Together with the wettest August in 100 years, the expectations for the upcoming updates from major retailers may be subdued (Morrisons and Dixons later in the week).

In Commodities Gold edged slightly higher to trade within 20% of its all-time high (currently trading at $1,694). In Oil, US Light Crude trading around $97.42 a barrel. In the FX markets, the USD slipped back a little as very light volumes due to the US markets being closed for Labour Day. With the attention now moving from Ben Bernanke’s speech in Jackson Hole last week to this week’s ECB meeting, we’ll wait to see any further big moves in the FX markets. Stronger than expected manufacturing data (PMI) from the UK (49.5 vs 45.2 in July) helped sterling recover after a slightly weak open. A figure above 50 for PMI is the difference between expansion and contraction. Are we set to break this key 50 level?

In today’s macro line-up, watch out for Eurozone PPI at 10:00 and unemployment change from Spain. A bigger than expected rise in unemployment could confirm a worsening economic situation, especially with weak GDP figures of late. In the afternoon, keep an eye on ISM Manufacturing (gauges condition of US manufacturing activity. It is considered to be the most important of all manufacturing indices. Liable to move markets, especially when periods of rapid economic growth approaching end of their cycle) and Construction spending (measures total amount of spending on US residential and non-residential construction activity. Construction industry bears significant impact on US GDP and state of economy) from the US at 15:00. Interesting fact of the day. US company Apple is now worth more than ALL listed companies in Portugal/Spain/Italy and Ireland. Following the upside surprise from the manufacturing sector yesterday (PMI – 49.5 vs 45.9), keep an eye on the UK PMI Construction figure at 9.30am – potentially offering evidence of preliminary effect of Government’s Funding for Lending Scheme announced last month.

As always, have a chat with your friendly trader for anything other information you require.

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

• NZ                    Commodity Prices                   In-Line
• AUSSIE             Current Account Balance        Better
• AUSSIE             Net Exports                             Worse
• JAPAN              Labor Cash Earnings               Worse
• CHINA              GDP                                         Worse
• See Live Macro calendar for all details

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

• DCC to buy Statoil Fuel & Retail business
• Ashtead profit boosted by U.S. recovery
• Whitbread poaches finance director from Premier Farnell
• DS Smith Q1 corrugated box volumes in legacy business slightly ahead
• UK’s nuclear plant Dungeness B22 resumes output
• SPIRIT PUBsays Q4 managed like-for-like sales up

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• 08:00                     SP           Unemployment Change
• 08:15                     SW         CPI
• 09:30                     UK          PMI Construction
• 10:00                     EU          PPI
• 15:00                     US          ISM Manufacturing
• 15:00                     US          Construction Spending
• See Live Macro Calendar for all data, incl. consensus expectations