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

UK 100 called to open +10pts despite US markets closing well in the red, taking a knock from US Pending Home Sales which missed consensus by quite a margin. Sentiment also suffered from the lingering fears in Europe, where confidence figures for the region dropped back more than expected (ECB to cut rates?). A disappointing Italian bond auction (interest rates in dangerous territory, didn’t sell all offered) and Spanish bond yields rising to even worse levels on account of its troubles in recapitalising of Bankia (ECB said no to recap via collateral) saw appetite for risk drain further.

There was the odd positive with the EU promoting talk of Eurobonds remaining an option and that a banking union was being discussed, however this was not enough to stem the outflow from risk assets. Use of the ESM to recapitalise banks was also rebuffed by Germany, which doesn’t want to foot the bill. Safehaven seeking favoured the USD (EUR at 2yr lows vs Greenback), and government bonds of US, Germany and UK hitting lows, at the expense of commodities such as Gold and Oil which pulled back (Gold touched $1530/oz before bouncing, while US Crude fell below $90/barrel). German 2yr bonds even fell to yields of zero, implying investors want a return of capital but not necessarily a return on capital. Safety is key.

Overnight macro data from the UK is supportive of a positive start with GFK Consumer Confidence better and Nationwide House Prices too. Japanese data was mixed with industrial production worse, but housing better. Swiss GDP beat expectations easily, however emerging market India missed. German retail sales were mixed, but positive for the month.

Asian markets overnight show markets lower on contagion fears regarding Greece, Spain and Italy, but not as weak as US markets closed, thanks to yet more talk of Chinese stimulus, this time via a cut in the RRR (Reserve Requirement Ratio) in June, along with some Japanese data being pleasing to risk appetite. Graaf Diamonds pulling its IPO in Hong Kong demonstrates the weakness in global equity markets.

Macro data of likely interest today is German Unemployment, given the nation’s strength within the troubled region. The Eurozone Consumer inflation Estimate will give an idea of whether inflation is rising or cooling and whether the ECB could have any room for manoeuvre regarding an interest rate cut to help stimulate the region’s economic growth. Thereafter we have US jobs data in the form of US ADP Employment change, US Challenger Job Cuts and US initial Jobless – all of interest ahead of tomorrow’s US Non-Farm Payrolls. The second estimate for Q1 US GDP will also be much watched, as will Chicago PMI and US Crude Oil Stocks.

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

• UK                    GFK Consumer Confidence     Better
• Japan               Industrial Production              Worse
• Japan               Vehicle Production                  Improved
• Japan               Construction Orders               Improved
• Japan               Housing Starts                         Better
• India                GDP                                         Worse
• Switzerland     GDP                                         Better
• Germany         Retail Sales                             Mixed
• UK                    Nationwide House Prices        Better
• See calendar for all details

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

• Gold Oil CEO steps down
• Thomas Cook first half losses widen
• Chime Communications sells Bell Pottinger assets
• Kingfisher sales drop as weather, forex hurt
• Rockhopper says location of acreage has put off some
• Regal Petroleum to sell Romanian interests
• Tate & Lyle finds right ingredients for profit lift
• UK’s Pru confirms to buy Swiss Re U.S. unit
• Halfords profit falls 27 pct, says trading tough
• Glencore, Xstrata eye last stretch in marathon deal

Morning Press Selection:

• Rush for havens as euro fears rise – FT.com – Capital Markets http://on.ft.com/KWX7EZ
• Euro’s survival remains the big bet – FT.com – Capital Markets http://on.ft.com/KdPRKB
• Commodities hit by eurozone fears – FT.com – Commodities http://on.ft.com/M7f8HJ
• Dublin in final push for EU treaty Yes vote – FT.com – Europe http://on.ft.com/JSiskV
• Bankia fiasco carries the same old lessons – FT.com – Columnists http://on.ft.com/KItYAg
• RBS says investors may never recoup losses – FT.com – Banks http://on.ft.com/KdxV2O
• Dividends key as cult of equity withers – FT.com – Markets http://on.ft.com/Kczy1l
• Swiss feel pain of franc’s safe status – FT.com – Currencies http://on.ft.com/LGKE99