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

UK 100 called to open -75pts with recent risk asset (equities, commodities) weakness extending in US trading (in the favour of bonds and the US$) and markets closing down 0.5% in reaction to news that Greece is to hold fresh elections after failing to form a national unity government (coalition). No big surprise, but worries about June’s re-run being a yes/no vote on referendum on Euro membership.

Sentiment soured after EU close with an FT report that Portugal was next in the exit queue if Greece quit the Eurozone and information suggesting Greece had seen outflows of €700m from its banking system since the failed elections. Hollande and Merkel’s meeting reiterated support for Greece and his focus on growth while also suggesting that the two leader’s political differences were not as wide as discussed in public.

Asian markets rattled overnight with declines fuelled by the political risk factor in Europe, and most notably Greece, raised the prospect of it abandoning the single currency. The topic of contagion is still rife with Spain to the fore with its troubled financial sector attracting much attention and Italy not far behind with its 10yr sovereign bond yields fast approaching 6%, where Spain is already sitting uncomfortably.

Nothing major in terms of overnight macro data, however in the commodities space we see Gold testing its December lows of $1,530/oz while Silver also fell and US Crude Oil fast approaching $92/barrel (Brent crude touching $110/barrel). In FX, USD stronger (flight to safety) versus GBP, EUR, JPY & CHF. GBP stronger vs EUR.

In focus today will be the UK jobless data (expect rise to 8.4%) and Bank of England inflation report (inflation still stubbornly high, commodities declines could help later). Both of interest with UK in recession but Europe having escaped yesterday thanks to a buoyant Q1 for Germany and flat growth France.  Later we’ll have Eurozone inflation (could it sway ECB towards more LTRO?) and Trade balance as well as US housing. US crude oil stocks could be of interest with stocks rising over the last 6/7 weeks.

Results out this morning from UK 100 components Icap (IAP), Land Securities (LAND) and Compass Group (CPG) and Scottish and Southern Energy (SSE).

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

• Japan               Machine Orders                      Mixed
• Japan               Tertiary Industry Index           Worse
• Aussie              Consumer Confidence                        Improved
• Aussie              Wage Costs                             Worse (higher)
• Eurozone         New Car Registrations                        Declines slowed
• See calendar for all details.

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

• Xchanging says trading in line with view
• Interserve trading in line, still sees stable 2012
• Compass H1 profit up 7.7 pct, positive on FY
• BG and Ophir Energy find more gas in Tanzania
• Anite sees year results ahead of market view
• Bovis says market conditions remain stable in UK housing market
• Bwin.party revenue up, tough poker market persists
• Tullow Oil says on track to meet 2012 production guidance
• SSE full-year profit rises
• ICAP sees flat 2011 revenue and profit
• Alliance Boots year trading profit up 12.4 pct
• Greggs 19 weeks to May 12 underlying sales down 1.8 pct
• African Barrick ups royalty paid to Tanzania by 1 pct
• SkyePharma readies for Flutiform launch
• Lamprell expects first half loss
• Capital and Regional says UK funds value stable in Q1
• Speedy Hire moves back into profit
• Soco says next platform at TGT on track for summer start

Morning Press Selection:

• Little country threatens big impact – FT.com – Europe http://on.ft.com/L7Opu8
• Portugal steels itself for Greek exit – FT.com – EU Economy http://on.ft.com/KLlZTJ
• ECB’s dilemma on the euro rescue – FT.com – Capital Markets http://on.ft.com/JdXZex
• How Keynes would solve the eurozone crisis – FT.com – Front page http://on.ft.com/K0VN4R
• Eurozone data pose dilemma for Osborne – FT.com – Front page http://on.ft.com/K3pPpa