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

UK 100 called to open +15pts, with Asian markets trading higher – risk appetite renewed after a brief pause, helped by comments from Chinese Premier Wen that he sees increasing wiggle room for monetary policy operations as inflation falls. Equities and commodities sentiment boosted by more hopes of stimulus, again.

China equities nonetheless down, bucking the wider Asian trend, after more disappointing macro data. Foreign direct investment (FDI) -8.7% since last July, signalling slowing in China and outsiders waning confidence in its prospects. This is combined with downbeat comments from the Ministry of Commerce regarding economic growth in the second half of the year.

Risk-appetite higher, despite continued mixed signals from data. US inflation was weaker than expected, which should boost expectations of the US Federal Reserve (Fed) easing monetary policy (Quantitative easing; QE) to rekindle growth. Industrial production was, however, better. While Empire State manufacturing was worse and Housing better. The old risk on/risk off market call has become QE on/QE off keeping markets moving.

Despite, a US central banker quashing expectations of more QE, optimism reigns supreme, bringing us back to the ‘good news is good news, but bad news is good news too’, which for me makes total sense. Good news implies progress and growth which please markets. Bad news implies help from central banks to encourage growth (or help out in the case of the European Central Bank, ECB, and the European sovereign debt crisis) which also pleases markets. A win-win situation, buoying markets. Unless data begins to be somewhere in the middle, or very mixed.

In the Commodities space Oil, notably Brent Crude (+$2 to $116), but also its US cousin (+$0.5 to $94), has seen a tick higher on geopolitical reasons after the Saudi Arabia, United Arab Emirates (UAE) and Qatar called for their citizens to leave Lebanon as the situation worsens in neighbouring Syria. As for Gold, it is being held back below $1605 by the prospect of further delays in QE from the US ansd the resulting stronger USD.

In FX, GBP weaker vs USD on prospect of US QE being further off. GBP also off its highs versus EUR after an initial surge yesterday where Bank of England (BoE) minutes showed no calls for even more stimulus. Unlikely this is on optimsim regaridng Europe, rather the weakening of the GBP vs the USD.

Focus today will be on July UK Retail Sales which have been extremely volatile this year, and are seen posting weaker growth than in June on account of poor weather and the impact on the clothing sector. Given the sporting summer, there could be positive upside from the Euro 2012 football championships and early days of the Olympics, which could set us up nicely for a better growth figure next month.

European inflation is seen unchanged from June. US Housing (starts and permits) figures and weekly US unemployment claims seen flat on last month/week. The US Philadelphia Fed is seen improving, although the disappointing figure from New York yesterday (first negative figure since last October) could temper expectations and shift expectations for Fed stimlus again.

As always, speak to your trader for a chat about the markets and what you like to trade.

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

• Aussie              Consumer Inflation Expects    Declined
• Aussie              Average weekly wages           Declined
• See Live Macro calendar for all details

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

• Cineworld H1 profit before tax £13.4m
• Barrick Gold in Talks with China National Gold Over ABG Stake
• Talvivaara Mining 2Q, 1H Losses Widen as Production Slumps
• Phytopharm: Period From April 1 in Line With Views; Financed to End 2013
• Standard Bank Posts Profit Rise, Warns On Difficult Environment
• Caza Oil & Gas Starts Drilling Copperline Bone Spring Prospect
• Micro Focus Adjusted EBITDA in Line, To Return 50P to Holders
• Desire Petroleum Sees 312M Barrels of Oil in Elaine and Isobel
• Reed Elsevier: Duncan Palmer To Replace Mark Armour as CFO
• Hikma Pharmaceuticals Half Yearly Report
• Allied Gold Mining PLC Clarification of claim against GRES
• PV Crystalox Solar Interim Results
• Victoria Oil & Gas Update Letter to Shareholders