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

  UK 100 called to open -120pts (early indications, subject to change), with volatility to the fore following US Federal Reserve Chairman Bernanke’s testimony and FOMC minutes which offered very conflicting messages regarding US policy notably the tapering and wind down of QE3.

 Fed talk (Bernanke still eyeing data, could taper if economy/employment keep improving, could increase if see a blip, but FOMC minutes suggesting some members in favour of tapering as early as June) lead to a negative US equity close.

 Matters made worse in Asia overnight by Chinese Flash Manufacturing PMI dropping into contraction territory adding to concerns about a Chinese recovery and thus global growth.

Asian bourses in the red, in some cases drastically, with Japan’s Nikkei going from +500 and fresh 5yr highs to down 900pts on the hawkish Fed language and despite BoJ raising its assessment of economy for fifth straight month and announcement of a ¥2tn fund supply operation to calm bond market spike.

Worries about China data and growth, with PMI Manufacturing index at 7-month lows and orders at an 8-month low, lead to negative read across to Australia and Hong Kong, down to the tune of 2%.

In focus today will be European PMI Manufacturing and Services which are expected to show slight improvement but to remain in contraction territory. UK Q1 GDP is not seen being revised upwards. UK Services expected to have slowed in March to near breakeven.

In the afternoon, US Jobless claims of interest in terms of signs of improvement the Fed will be looking for to make its decision on QE3. US PMI Manufacturing should have remained above 50, at odds with other manufacturing data. US Housing likely to have remained buoyant but Eurozone Consumer Confidence to have remained in the doldrums.

The UK 100 now well off its 14yr highs of yesterday (6877). Potential for support at 6700 thanks to rising trendline from mid-April (already tested), then 6,600 and 6,550. Could that be the correction required for a renewed assault, or is this the start of something more significant with those in longer-term profitable positions cashing out and those with a more aggressive approach adding to the fire?

Likely much more discussion and volatility surrounding any comments from Fed speakers. One thought though, tapering has not been quantified, so $85bn could be trimmed to $80bn while any blip could see it quickly increased to $90bn. Much ado about nothing?

 In FX, GBP/USD down near 1.5 as USD strengthen on prospect of QE3 tapering/wind-down of QE3 tapering. EUR/USD reversed its gains to retest 1-month lows near 1.28. This could be exacerbated by any worse Eurozone PMI data today. USD/JPY back below 102 as equities fall following major gains over last few months. AUD back at June 2012 lows of 0.9585. Watch price and RSI for potential rebound call – valid for last 3 yrs.

 Gold after initial jump above $1400 on Bernanke’s dovish testimony, it quickly returned to recent $1380 level on prospect of QE3 tapering and stronger USD, benign inflation and less interest in the yellow metal as a safehaven.

US light Crude corrected down to $93 on stronger USD. Potential for correction to last week’s lows of $92.5. Brent Crude showing similar traits with a fall below $102, and potential for correction to last week’s low of $101.

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

• Aussie      Consumer Price Inflation Expectations      Solid growth
• China       HSBC Flash Manufacturing PMI                 Worse

See Live Macro calendar for all details

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

• Lloyds raises 450 mln stg from St. James’s Place share sale
• Booker full-year pretax profit rises
• Investec says FY diluted heps up 18 pct
• EasyJet acquires 25 Gatwick slots for 20 mln stg
• BTG to buy blood clot treatment specialist EKOS
• Quintain Estates NAV rises, on track to meet debt targets
• Helical Bar NAV rises 5.6 pct, sees outperformance from next year
• Electrocomponents profit before tax at 98.7 mln stg
• Pub chain Mitchells & Butlers Plc reports broadly flat H1 sales
• Aveva confident after posting 13 percent profit rise
• Dairy Crest profit rises
• Qinetiq profit rises 6 pct, launches review of U.S. business
• Daily Mail says full year outlook unchanged
• Parkmead agrees to acquire Lochard Energy for 14.5 mln stg
• Flybe says turnaround to deliver 30 mln stg of cost savings
• SABMiller earnings rise thanks to Latin America, Africa surges
• Mothercare full-year profit boosted by turnaround plan
• Vedanta Resources says prices $1.7 bln bond offering
• Wood Group wins contract with Hess in Gulf of Mexico
• United Utilities net profit down 9.3 pct, div up
• Electrocomponents profit falls 19 pct on weak international demand