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

UK 100 called to open +25pts after US markets closed with decent gains helped, not by specific macro data or events, but by European Central bank (ECB) comments regarding a ‘banking union’ (seen as beneficial by many, except UK Prime Minister David Cameron) and rates possibly falling to ‘zero’, as well as stimulus-friendly rhetoric from US Federal Reserve (Fed)  members.

The latter buoyed expectations that monetary easing may be just round the corner, to help boost economic growth and employment. There was also speculation, after the fizzled out euphoria of the Spanish bailout saw Spanish and Italian bond yields move back to unsustainable levels, that the ECB had reactivated its Securities Markets Programme (SMP), buying sovereign bonds to bring the countries’ implied interest rates back down.

Overnight in Asia-Pacific, markets mixed after the tepid US gains with the prospect of a messy Greek re-election in the back of traders’ minds and the speed of the sentiment turn regarding the crisis after the Spanish bailout move shows that more clearly needs to be done to convince the markets. Comments from ratings agency Eagan Jones that Spain and Italy will need full bailouts within 6-months also served to hold back optimism.

Overnight, macro data shows a rebound in Japanese machine orders, with the figures beating expectations comfortably. Australian Consumer confidence also showed improvement. Back in Europe, French and German Consumer Inflation prints were in-line with expectation around the acceptable 2% annualised, providing little ammo for the ECB to cuts rates. Although the weak monthly inflation may see them worries that this trend could continue and that another stimulus means may be necessary. This after having held fire last week.

Looking to FX and commodities, USD weaker versus GBP on prospect of more easing, but flat vs EUR on the region’s woes. Gold remains stuck around the $1600/oz level, with 4-month falling resistance a hurdle. Brent Crude relatively unmoved around $97/barrel, with US Light Crude doing the same around $83/barrel.

Macro data likely focused on today will be Eurozone Industrial Production which consensus suggests will have deteriorated further in April, as the crisis woes continue to impact the economy.  Italy’s debt auction may also be affected by dented by yesterday’s fall in confidence. US retail Sales and Producer Price inflation (PPI) could both also influence rate-setting and stimulus decisions from the Fed.

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

• Japan               Machine Orders                      Better
• Aussie              Consumer Confidence         Improved
• French             Consumer Inflation              In-line
• German           Consumer Inflation              In-line
• See Live Macro calendar for all details

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

• Cairn buys second North Sea firm in $644m deal
• Sainsbury’s sales get Jubilee boost
• Xcite Energy says latest well finds more oil at Bentley
• JD Sports sales up 1.5% in last 19 weeks

Morning Press Selection:

• We must avoid an accidental Greek exit – FT.com – Markets http://on.ft.com/MpoxaP
• Cameron in pledge to City over EU bank union – FT.com – UK Politics & Policy http://on.ft.com/Nwj7Nm
• Clamour for change on Europe’s banks – FT.com – Markets Regulation http://on.ft.com/MASbqv
• BoE deputy challenges credit stance – FT.com – UK Politics & Policy http://www.ft.com/cms/s/0/d51c45aa-b4b3-11e1-bb2e-00144feabdc0.html
• UK-backed banks not obliged to warn investors – FT.com – Banks http://on.ft.com/NxhejG
• A new form of European union – FT.com – Columnists http://on.ft.com/LY6THa