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

UK 100 called to open -5pts, weakening after another positive session yesterday where early May highs of 5,820 were tested but held. We are off the pre-close highs of 5,840 with traders likely taking a slight breather after the significant 200pt rally following Draghi’s ECB speech on Thursday and the better than expected US employment figures on Friday.

Asian markets have held up pretty well overnight, remaining optimistic and building on solidity from US equities which, like Europe, continue to trade on expectations that the ECB will deliver on measures to help ease Spain and Italy’s borrowing costs and avoid any more Eurozone sovereign crisis pain.

There is also continued pining for the US Fed central bank to deliver more monetary stimulus to keep its economy ticking over. There was, however, hawkish comments from a Fed member regarding more easing ahead of November’s US election which tempered this slightly.

Around the Spain/Italy situation, speculation of a Eurogroup meeting in early September (yes, a whole month to wait). Discussions on Spain bailout; sorry, request for assistance from bailout funds (and thus ECB) to intervene in sovereign bond markets to calm borrowing costs. Prime Minister Rajoy maintains waiting for details of ECB help measures before asking for help.  I imagine he prefers to know how stringent the supervision will be before crying ‘help’. Italy still waiting for Spain to jump.

Overnight macro data showed UK BRC Retail Sales in July posting better growth of 0.1% versus consensus of -0.2% and after growth of 1.4% in June. Australia kept interest rates on hold.

In commodities, Gold mimicking equities, finding ceiling overnight after strong 2-day rally. The Oils maintain their uptrend, helped by both geopolitical reasons and hopes of stimulus and economic revival. In FX, GBP weaker vs USD and EUR overnight. EUR flattish versus USD.

Corporates results out this morning from miner Xstrata (XTA) which has beaten Q2 profits expectations along with insurance giant Legal & General (LGEN). Other results out include Greggs (GRG), Intercontinental Hotels (IHG), Meggitt (MGGT) and Premier Foods (PFD). For more details call in to the trading floor.

Today’s focus likely on UK Manufacturing and Industrial Production which is seen posting big declines in June on account of an additional two bank holidays in the month and poor weather (both blamed for bad Q2 preliminary GDP). German Factory orders are also seen showing contraction although not as strong as the UK highlighting the problems associated with slowing orders growth in a region which is being impacted by debt crisis and necessary austerity.

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

• UK                    BRC Sales                                            Better
• Aussie              RBA Interest Rate                               Unchanged
• Swiss                Unemployment                                   In-line
• See Live Macro calendar for all details

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

• Greggs profit hit by summer washout
• Legal & General’s profit beats forecast
• Xstrata H1 earnings drop, defers $1 bln of spending
• Xstrata says well-positioned as standalone miner
• Premier Foods profit rises on boost from key brands
• Mondi’s first-half earnings down, dividend up
• Pendragon H1 profit before tax 23.6 million stg, up 30 pct
• Meggitt first-half profit up 15 pct
• StanChart rejects DFS claims on Iran dealings
• JKX Oil & Gas wins multi-stage fracture stimulation contract
• New World Oil & Gas assigned 12.5 pct interest in Danica Jutland Project
• InterContinental to return $1 billion as profits rise

Morning Press Selection:

• Bank scandal has silver lining for UK – FT.com – UK Economy http://on.ft.com/Nxm8by
• Bond buying plan heightens ECB dilemma – FT.com – EU Economy http://on.ft.com/OLuKxm
• Greece’s bond auction to test resolve – FT.com – Europe http://on.ft.com/NxvSmj
• The euro still has a mountain to climb – FT.com – Editorial http://on.ft.com/OLipJD
• Full public ownership would ease the clean-up of RBS – FT.com – Opinion http://on.ft.com/O1ROcc
• Falkland oil – drilling for profit – FT.com – Lex http://on.ft.com/PzL0Qy
• Too soon for markets to relax – FT.com – Markets http://on.ft.com/NZ6OKF
• Banks see the appeal of going local – FT.com – Banks http://on.ft.com/TaYVAU
• Draghi and friends just want your money – FT.com – Markets http://on.ft.com/Q2zduk
• Europe profits raise doubt on stocks rally – FT.com – European Equities http://on.ft.com/QG01r9