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

UK 100 called to open -115pts in reaction to Saturday’s announcement that Cypriot savers would be forced to participate in the country’s bailout, with one-off haircuts (billed as ‘bank levy’ to get around deposit protection guarantees) of up to 10% on deposits (shares in re-capitalised banks received in return), creating a new precedent in the Eurozone debt crisis and to fears of bank runs and contagion risk back to Greece, Spain and Italy.

Equities in Asia lower as a result, dropping their most in 8 months and putting a halt to recent gains, with 2% losses across the board, with weakness in China also attributed to better than expected Property Prices which increased worries of more tightening measures to cool the market.

Other overnight macro data showed UK House Prices maintaining their annual growth improvement, while Aussie Motor Vehicle Sales rebounded in after a weak January. The fact that Moody’s has said the Cyprus bailout is negative for depositors across Europe and may hurt bank ratings across the region goes to reinforce the magnitude of the decision, although we do note that there is still potential for the measures to be softened (Cyprus parliament vote this afternoon).

In focus this week: The UK budget will likely dominate the headlines after Chancellor Osborne admitted at the weekend that he’ll probably have to push out the deficit cutting target yet again, allowing other ratings agencies to pull the downgrade trigger. What will he propose to actually boost growth and help bring in more money to cut defect? Dovetailing the stimulus themes, BoE Minutes much watched for any change in vote on QE and with Unemployment seen improving yet again and continuing to emphasise the UK’s current output gap .

Elsewhere, the Fed meets and has press conference but with no expectations of policy tightening just yet with macro data encouraging but not enough to get excited about. ZEW surveys always good to move Eurozone sentiment, UK inflation likely ticked up in GBP weakness of late from higher import prices. European Flash PMI Manufacturing and Services seen improving a touch, with all but Germany but still below 50 level between growth /contraction.

UK 100 given up all its gains of March to test lows of 6340, breaking what we had identified as support around the 6390 level. Off our worst levels, but no guarantee that developments don’t see a more volatility as the bailout measures are debated. Note however the long-term support at 6315 which would maintain the trend from late last year. Those shouting overbought have had their calls satisfied. Is this enough of a correcting now, or have we entered a new era of the crisis?

In FX, no surprise that the EUR has weakened on the Cypriot development, with EUR/USD dropping below the 1.29 level (and 200-day moving average 1.2965) and GBP/EUR rebounding (gap up) back above recent 1.16 resistance to regain 1.17. In GBP/USD, no real deviation from Friday’s 1.51 level, after the bounce from recent lows as USD strength finally gave way despite the good run of macro data and plenty to be concerned about with UK finances ahead of this week’s budget.

In commodities, Gold back up above $1600 on safehaven on reigniting of Eurozone debt crisis and the recent. Support here? In Oil, US Light Crude back at recent lows around $92.5 on global growth fears. Brent Crude also weakened back to $108.5 giving up most of last week’s recovery from lows $108 to test $109.5.

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

• UK                    Rightmove House Prices         Mixed
• Aussie              New Motor Vehicle Sales       Mixed
• China               Property Prices                       Improved

See Live Macro calendar for all details

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

• M&C Saatchi full-year profit rises 10 percent
• BG, Ophir say latest Tanzania well results are excellent
• San Leon teams up with Halliburton to explore Polish shale
• Essar Energy appoints Deepak Maheshwari as CFO
• Legal & General says to buy stake in UK home builder Cala