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

UK 100 called to open +35pts at 6343, well off yesterday’s test of April lows and another rout in Japan, helped by a turnaround (Europe closed breakeven) boosted by solid US Retail Sales and Business Inventories, but no major improvement in Jobless Claims to increase QE3 taper fears nor increase in US Import/Export Prices to fan inflation/rate hike concern. After day, support emerged.

Europe overcame significant weakness on the open helped by US data but also from ECB officials vocal on OMT, saying in-line with its mandate appeasing those fearful the backstop of all backstops might not be as feasible as thought, as well as warning on low rates for long-term posing risks and being technically ready to look at negative rates.

US bourses maintained recovery into the close on comments by WSJ Fed-watcher Hilsenrath’s article saying the US central bank will push back expectations of a rate rise even if QE3 tapering (yet to be quantified) could on the horizon. This would make sense after equity markets corrected 4-5% in the US (much more in Europe), taking the froth out of the market and reducing bubble-potential before any resumption of upward trajectory on revived hopes of easy policy for foreseeable future.

Asian markets positive with Japan rebounding (USD/JPY <95) in-line with US recovery in reaction to macro data and the WSJ article soothing Fed easy policy/stimulus fears. Despite BoJ minutes showing one member saying limited QE may stabilise Japanese government bond (JGB) and 2% inflation target was tough, sentiment on Nikkei helped by government approving measures to boost growth and intention to will implement growth strategy at unprecedented speed, with additional measures as needed.

Note a Goldman Sachs report expecting China to report average growth of 6% through 2020 from consensus of 7-8% this year and down from high-single digits recently. This may get some attention and increases emerging growth jitters, but given where it has fallen from the additional growth is still significant and Australian equities (sensitive to China growth) are up handsomely overnight while Shanghai is breakeven.

In focus today we have Eurozone Consumer Price Inflation which is seen a touch higher than the prior month but still benign, unlikely to help/hinder EUR in-terms of rate hike or cut expectations. In the afternoon, US Industrial & Manufacturing Production figures seen rebounding from last month’s weak numbers, although capacity use seen flat. To close the week the preliminary Uni of Michigan Consumer Confidence reading is seen flat on last month’s jump to a record high since July 2007.

UK 100 rebounded from 6200 and test of April lows. 1-month growth shows trendline of falling highs from 28/29 May broken, but 3-month shows trendline of old support-turned-resistance still in play as a hurdle around 6350. Still work to do.

In FX, GBP/USD still nudging higher (1.57), helped by US data not adding to QE3 taper fears and WSJ article talking of Fed taking down expectations of a rate hike. Resistance 1.58, Support 1.56. EUR/USD doing the same, helped also by ECB official providing positive rhetoric. Resistance 1.36, Support 1.32. USD/JPY downtrend from recent highs still in play –rebound to near 96 lost momentum. Back <95.

 Gold still tracking sideways on uncertainty over fed policy. Still below $1400, still hindered by 200-day moving average $1392.

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

• Fastjet in new 15 mln stg financing facility with Darwin
• Fastjet to launch int’l flights, puts S. Africa on hold
• Retroscreen Virology Group to raise 25.5 mln stg through placing
• Glencore Xstrata signs new credit facility