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

UK 100 called to open +15pts at 6590, helped by a positive session in Asia with no surprises from the BoJ minutes and Japanese macro data showing machine orders less weak than expected, offsetting some growth concerns after yesterday’s weak GDP and fears that a sales tax hike would derail the key consumption component too early on in the Abenomics strategy.

Asia also helped by China injecting more cash into the interbank system to maintain market confidence after the difficulties and credit crunch fears of June. Australia positive despite business confidence slipping on cooling demand from China for commodities, with optimism still that Beijing has room to move on more stimulus. Some talk from Fed Economists that QE provides modest boost to US growth.

Other overnight data includes UK house prices in the form of UK RICS House Price Balance which made a big jump higher, well beyond expectations to hit a 6yr high. There are worries government initiatives stoking the fires of another property bubble, with first time buyer numbers hitting 6yr highs and rental demand fuelling the buy-to-let sector.

In focus today we have UK inflation data which is of interest given that inflation is one of the new BoE governor’s potential knock-out clauses alongside his pledge to keep rates low through mid-2016. Producer Input & Output prices seen rising (even the core reading), while Consumer & Retail prices are expected to cool a touch

Eurozone Industrial Production seen rebounding and ZEW surveys continuing to edge higher as confidence returns to the region which it is hoped shows a rise from GDP recession tomorrow. ION the afternoon US Retail Sales (a key indication of consumer confidence) are seen growing just a little slower than last month although the ex-Autos reading is seen rebounding. Business Inventories seen ticking up in June.

The UK 100 weakened sharply yesterday to retest both the rising lows from 7 Aug as well as the falling highs from which it broke on Friday. Uptrend and recovery still intact, even if limited ground gained yesterday. This morning almost regained 6600 although momentum limited amid thin volumes. Support still 6560 from rising lows and resistance 6610 from yesterday’s early morning highs.

In FX, GBP/USD maintains correction from trio of resistance around 1.555/1.56 to test 1.545 with the USD stronger ahead of the US retail Sales report which is seen supporting expectations that the Fed may move to taper in September. EUR/USD also back at 1.33 from highs of 1.34.

USD/JPY rebounded from 6-week lows of 96 to retake 97.5 on combination of US data and Fed taper expectations as well as a report that PM Abe may consider reducing corporation tax to offset pressure from the planned sales tax. USD Index rebounded from 81 to revisit 81.5 although downtrend from early July yet to be broken decisively.

In Commodities, Gold staying perky up around July highs of $1350, maintaining its recovery from  despite stronger USD helped by talk that the world’s biggest Gold ETF (SPDR Gold Trust) saw net inflows up for first time in two months, offsetting the lack of recent drivers (no need for inflation hedge or safehaven demand, no yield). That’s two days closed above falling highs from May.

Oils slowed up after rebound from 1-month lows, although Brent Crude showing potential for quick regain of 1-month highs than US Light Crude.

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

• UK            RICS House Prices                           Better, improved
• Japan       Machine Tool Orders                     Better, less weak
• Aussie      NAB Business Conditions                Mixed

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

• Ithaca Energy Q2 net earnings rise on higher production
• Vectura says trading in line, remains confident
• Glencore Xstrata unit cuts budget for $5.9Bn Philippine mine project
• Resolution – IFRS-based pretax profit £191m
• Synthomer profit falls 10 percent on weak European demand
• PageGroup posts 11% profit fall on weak Europe
• EnQuest H1 profits down 13.2%, delays new field
• Russian retailer X5 posts Q2 earnings above forecasts