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

  UK 100 called to open +15pts around 6570, showing a continued waning of momentum (discussed in detail in our weekly roundup) with yet another lower high overnight following several weeks testing a 6660 ceiling, however some big M&A announcements in advertising and healthcare (Publicis-Omnicom, Perrigo-ELAN) may serve to rekindle some market optimism.

Asian markets lower across the board despite a positive finish to the US week (just) with sentiment dented since on comments from the IMF that risks to the US economy were to the downside and the USD mildly overvalued. Japan the underperformer on poor retail sales data and as the JPY continued to strengthen (USD/JPY <98). The BoJ’s Kuroda maintained his optimism of inflation returning and the 2% target being hit, at odds but spoke against PM Abe’s plans for a tax hike, seeing it potentially hurting the economy.

Chinese equities in the red after weaker industrial profits data and a stalled leading index and reports of a nationwide audit on government borrowings, on concerns over local authorities management of finances and spending. Australia dented by China/Japan knock-on. Other data showed UK house prices still creeping higher.

Markets still contending with mixed earnings reports and a big focus this week on the UK banks (BARC, LLOY, RBS) which are set to update on their progress on growth, towards renationalisation and with putting scandals behind them with continued write-downs.

In focus today, in a week where all eyes will be on central bank communication and policy hints rather than changes, plenty of data to keep markets moving. All eyes on whether QE3 tapering any closer by the Fed, but we still believe more data needed before the call is made, especially with NFP on Friday. As for the BoE and ECB, it’s all about forward guidance and putting markets at ease that rates will stay low for a while longer.

Don’t forget also the update on European and Chinese PMI Manufacturing updates on Thursday which could well be hinge points for market direction given the concerns over slowing growth in the former and after the better flash readings for the latter last week. US GDP also seen slowing in Q2, in contrast to the UK’s accelerating last week, while Friday’s NFP seen just a touch lower than June.

Today’s data points are limited to UK CBI reported sales – seen improving markedly in July thanks to weather no doubt – and US Pending Home Sales which is an area of data that has been suggesting rising consumer confidence.

The UK 100 made another lower high since 24-Jul, adding to our view that momentum is waning in in the UK index and that the sideways consolidation may be under threat, opening up the possibility of a correction before a renewal of the long term uptrend. Watching support at 6540 then 6515, and note that 6480 is still only 3% lower from recent highs which were registered after gains of 11%.

In FX, GBP/USD still struggling with 1.54 as a hurdle but still with rising support around 1.535.  EUR/USD still toying with Friday’s high of near 1.33. Speculation on central banks’ policy action likely to move things around.

In Commodities, Gold still in its steep rising channel $1310-1350. Watch for weaker USD helping the yellow metal, but note lack of fundamental drivers (no inflation, lack of safehaven demand etc).

Crude Oil back at 12-July lows of $104 on global growth concerns, with recent highs $108 likely major resistance now. Brent Crude in the middle of wide $106.3-107.9 range, well off highs but with 1-month support around $106.2.

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

• China       Industrial Profits                 Deteriorated
• China       Leading Index                     Deteriorated
• UK            Hometrack Housing            Improved
• Japan       Retail data                          Worse

See Live Macro calendar for all details

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

• Rio to sell NSW mine to Chinese firm
• Intertek profit margin curbed by minerals weakness
• National Grid says outlook unchanged
• Creston like-for-like revenue down 5 percent
• Randgold says seeing improvements at Tongon mine
• Polymetal sees $280 mln – $340 mln impairment charge
• Croda to buy 65 pct of China’s Sipo
• Ophir says Mkizi discovery is in line with expectations
• Costain wins 26 mln stg power distribution deal
• XP Power H1 pretax profit rises
• Reckitt sales rise, sees full-year at top of range
• Balfour Beatty preferred bidder for wind-farm transmission
• Keller Group revenue rises 5 pct
• Vernalis first-half revenue up 29 pct
• Fidessa H1 EBITDA falls 5 pct
• Hiscox says first-half profit up to 180.7 mln stg
• Senior Plc says first-half profit up to 48.3 mln stg
• Hammerson net asset value per share rises to 551 pence
• JKX Oil H1 profit from operations $9.4 mln
• Aberdeen says net outflows top $5.2 bln