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

  UK 100 called to open flat at 6570, stuck in the middle of yesterday’s range as the summer rolls on and caution dominates ahead of the central bank update fest today and tomorrow, with Asian markets mixed yet subdued after a rather muted US session on light data.

All eyes on whether the US Federal Reserve’s FOMC update this evening provides fresh hints on the future of its current QE3 stimulus policy. With no press conference, the accompanying statement will be forensically dissected for signals. Tapering any closer? Still lots of talk about the Bernanke successor, and how quick he or she would withdraw QE3.

More M&A will likely keep summer sentiment buoyed, with France’s Schneider Electric having agreed a deal to buy the UK’s Invesnsys (ISYS) for 502p per share (14% premium). In Europe, Portugal’s government won a confidence vote aimed at strengthen its recently troubled coalition..

Greece’s finance minister said it may avoid a budget hole in 2015/2016 in contrast to the Troika expectations, while Cyprus agreed to a 47.5% haircut on Bank of Cyprus deposits >€100K to help recapitalise it.

In Asia, China benefited from comments that liquidity to remain ample but Japan bucking positive regional performance on weak data prints.

 Overnight data was plentiful and yet not market moving with UK Shop Prices falling back, in-line with recent cooler inflation data, while UK GFK Consumer Confidence improved. However, German Retail Sales missed by a long way, although July may also see a revival on the good weather.

In the Far East, Japan’s Manufacturing PMI disappointed after the recent data was supportive of Abenomics, Labour cash earnings and Housing Starts weren’t as strong as expected, and Construction Orders growth cooled. In Australia, Private Sector Credit growth accelerated.

The big UK results of the morning are Taylor Wimpey which beat expectations, helped by an improved housing market and consumer confidence, better financing availability and government initiatives. Diageo also beat, benefiting from higher prices and M&A in emerging markets. British American Tobacco results are mixed, with revenues in-line but profits missing.

 In focus today will be the build-up the FOMC meeting and while no change is expected, it’ll all be on the language used in terms of outlook and direction of policy. Ahead of that though, we have German Unemployment which is seen flat on last month as is Eurozone Consumer Price Inflation.

In the US, given the importance of employment data, the ADP will be watched as warm-up for NFP on Friday. ADP seen around the recent NFP average of 190K. US GDP in Q2 seen falling back to 1.0% annualised from 1.8% in Q1. The Chicago Fed PMI seen improving.

The UK 100 maintains its limited range and sideways shift, although the falling highs from 24 Jul offer the possibility of a bearish descending/converging triangle which would imply a break to the downside. As we discussed yesterday though, given the slow price action and low volumes of late any decline may still be limited and gentle.

In FX, GBP/USD fallen all the way back to 1.52 levels of mid-month, as the USD strengthens in the build-up to the FOMC and increasing expectations of tapering starting in September. EUR/USD weakened but less so, still just bout hanging on to the trend of rising lows from 15 Jul. With both pairs it’s still a tussle between the action of each components central bank today and tomorrow.

In Commodities, Gold unmoved despite stronger USD, still just about in steep rising channel with $1320-1350. Fundamental drivers still lacking (no inflation, lack of safehaven demand, liquidations) etc.

In Oil, US Light Crude maintains correction phase, falling back to test $103 on uncertainty over economic growth and energy demand and caution ahead of central bank updates. Brent Crude maintaining some poise, holding up around $106.6, which if supportive could allow for a revisit of recent highs $107.8.

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

• UK            BRC Shop Price Index                     Deteriorated
• UK            GFK Consumer Confidence             Beat
• Japan       Manufacturing PMI                                    Deteriorated
• Japan       Labour Cash Earnings                     Missed
• Aussie      Private Sector Credit                      Beat
• Japan       Housing Starts                                 Missed
• Japan       Construction orders                        Deteriorated
• Germany Retail Sales                                     Miss
• Switz        UBS Consumption Indicator            Deteriorated

See Live Macro calendar for all details