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

UK 100 called to open flat at 6250, the hinge point we had been concentrating on yesterday in terms of a break above having potential to see the bulls gain confidence in the prospect of a reversal and the bears call it a day with the trend of falling lows from end-May called into question. Accommodative/backtracking central bank talk helping.

 Overnight, Asian markets posted solid gains with the latter boosted by Japan’s Nikkei making ground on a weaker JPY (back to 99) and macro data suggesting Abe-nomics may be working through with progress towards a return to growth and the end of deflation, with better Industrial Production, Construction Orders  and Retail Trade and CPI getting back towards breakeven.

 Asian/Global Sentiment kept calm in Chinese equities with more comments from the PBOC that it will maintain stability in money markets and will fine tune policy as required to avoid liquidity problems which have weighed of late.

 European and US bourses gave Asia a positive lead after solid US data and Fed members talked down QE3 tapering fears, saying markets have over-reacted/over-analysed/mis-interpreted and that everything depends on US data maintaining its positive momentum. If it doesn’t, timetable will change. Even the IMF Chief Lagarde piped up saying tapering may not be round the corner.

 Other data included weaker than expected but still very strong UK House Price rises and much stronger German Retail Sales this morning. Note FT report on Greece that a second key privatisation deal may collapse, while progress on EU banks bailout still has years until implementation and so improvisation and muddling through likely to continue.

 In focus today, after the UK’s better recent GDP data (although revisions mean older data worse, so recession was worse, so recovery will be longer) we have the significantly important Index of Services (70% of UK output) which is seen solid in April, but slower than March. German CPI is seen slowing in Jun, which would give the ECB room for a rate cut if it saw the need.

 With so much hype regarding Fed member comments in the wake of Bernanke’s ‘the end may be closer’ statement last week (there are more today; it’s Fed member Bingo!) all US data is being watched and the Chicago Fed and Uni of Michigan Consumer Confidence will be no exception as the week, month and quarter comes to a close. Beware window dressing by traders, crystallising profits and making portfolios look good.

 UK 100 back above 6200 and 6250 which shows progress and leaves us more confident that a reversal could be on the cards. Backed up by daily chart showing three consecutive up days (bullish candlestick pattern). After a 4.5% rebound though, and given that it is the end of a volatile week/month/quarter, things could actually be calmer.

 In FX, GBP/USD still in downtrend as USD strengthens on prospect of QE3 tapering, but given equity market advances, it may also be linked to more confidence in the US economy. Do we actually believe in Bernanke’s optimism? Support at yesterday’s 1.52 lows. EUR/USD also bounced off 1.30 but still in downtrend from mid-month highs. ECB vs Fed, who can be more dovish? USD/JPY rallied to 99 on USD strength. If 97-98 was a pause, potential for rebound to 102.

 Gold still getting slapped by stronger USD, with a test of $1180 overnight. The $1200 level has been regained, but the downtrend makes our suggestion of downside to around $1150 look conservative.

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

• UK                    GFK Consumer Confidence     Unchanged, In-line
• Japan               Manufacturing PMI                Improved
• Japan               Household Spending               Worse
• Japan               Jobless rate                             Worse
• Japan               Inflation                                   Mixed
• Japan               Industrial Production              Better
• Japan               Retail trade                             Better
• Japan               Construction Orders               Big rebound
• UK                    Nationwide House Prices        Worse
• German           Retail Sales                             Better

See Live Macro calendar for all details

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

• Chariot Oil says George Canjar to become new chairman
• Keller Group reports no significant changes to trading or outlook
• Serco says on track to meet expectations for 2013
• Entertainment One sees FY meeting its expectations