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

  UK 100 called to open +20pts around 6610, (the same opening call level of the last 3 days!) thanks to a positive lead from the US and Asia-ex-Japan, as WSJ Fed watcher Hilsenrath said the Fed will leave QE3 unchanged at next week’s policy meeting.

The subsequent weakening in the USD vs majors has dented exporters on Japan’s Nikkei, with the index down almost 3%, back at levels of 8 Jul as the JPY strengthens on a relative basis (below 99). Although the rest of Asia in the green albeit marginally as the week comes to a close.

Overnight data mixed with positive Japanese inflation data supporting use of the new PM’s Abe-nomics strategy and market hopes that the nation can reflate and return to growth. Fears of a China slowdown – one of the reasons for yesterday’s weakness; mini-stimulus programme seen having limited effect – compounded by China MNI Business Sentiment Indicator slipping more than 2pts.

Positive Friday sentiment also helped by strong Nasdaq performance with Facebook benefiting from strong results and shares putting on 30% to regain levels not seen since June 2012. This offset strong US data (Jobs, Durable goods, Kansas Fed) which had added to fears of tapering,

European bourses also called positive after the data of yesterday (solid IFO after better PMIs, UK GDP improvement) failed to offset mixed European Q2 results and the IMF saying the ECB needs to do more to help Eurozone (rate cuts, negative rates, LTRO4) and that growth may not return until 2014 and talks of dismissive remarks regarding QE3 by Fed chair frontrunner Larry Summers.

In focus today amid a very quiet calendar and a third week for the UK 100 closing within the 6500-6660 zone (consolidation) will be the US Uni of Michigan Consumer confidence as markets continue to look for signals from the US economy and decipher the outlook for Fed stimulus.

The UK 100 made a real test lower yesterday relative to its recent range, which resulted in the first real lower high in 3 weeks and no test of the breached support-line abandoned on Weds/Thurs. The risk now is that momentum is flagging and that we fall to the base of the recent consolidation zone and that the ultimate break is lower. A recovery above 6630 would revive bullish hopes, while a break below 6540 and especially 6515 would be bearish.

In FX, GBP/USD benefited from Hilsenrath talk of Fed maintaining status quo on QE3 at next week’s meeting. Break above 1.53 could see it become support for a rally to 1.57. EUR/USD also rallied to 1.33 although IMF calls on ECB could weaken EUR and limit relative gains.

In Commodities, Gold slowed up at $1350 prior breakdown, but trading in narrow steep rising channel with $1310-1350 range. Too steep? Watch for weaker USD helping, but note lack of fundamental drivers (no inflation, lack of safehaven demand etc).

Oils continuing to fall back losing momentum on global growth concerns and new production sources such as Shale and fracking although there was an incident on the Yemeni supply line which reinforces supply risks. Brent Crude back below $107.5 after brief rally from $106.5. US Light Crude back down near $105 but well off recent $109 highs.

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

• Japan       Consumer Price Inflation    Better
• China       MNI Business Sentiment     Deteriorated
• Germany Import Price Index              Worse

See Live Macro calendar for all details

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

• BG flags Egypt concerns at Q2 results stage
• Pearson first-half profit falls on restructuring charges
• Anglo’s new CEO lays out plans to slash costs as H1 profit drops
• Anglo American shakes up management, structure
• Homeserve says trading in line with expectations
• Ruspetro says to benefit from tight oil tax relief
• BSkyB announces new buyback after strong year
• Ultra Elecs wins $500 mln F135 engine contract
• United Utilities says Q1 revenue up on price rises
• United Utilities revenues up despite volume hit