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

UK 100 called to open +5pts after US equities closed mixed, recovering from a poor open which was fuelled by markets’ (equities, bonds and FX) turn-about-face reaction to the Greek election (a very similar reaction to Spain’s financial assistance announcement last weekend). The chance of a radical action are reduced, but typical of politicians once in power will they change their tune?

Another deterioration in Spanish bad bank loans (what has brought its banking sector to request help) saw bond markets punish the country, sending its borrowing costs to euro era highs (7.25%), and that little bit closer to needing a full bailout. There was a knock-on effect to Italy which saw its costs rise above 6%. Contagion is not to be taken lightly.

News from the Mexico G20 comprised (as it did with Cannes last year) an elaborate statement of intent regarding the European financial crisis rather than roadmap of concrete measures (I said I had little faith). Later on, however, it was amended to include steps towards a European banking union. This may appease investors, but remember it is a very long-term initiative.

Discussions continue in Greece to form a coalition with New Democracy (ND) the senior party. The hope is that Tuesday will see the formation of a government, so that the nations can send a finance minister to the Eurozone Summit at the end of the week. The country is rapidly running out of money. They say one month of cash left for paying bills (pensions, civil servants etc.).

Markets still wary of opposition party Syriza potentially patiently waiting in the wings to pick up the pieces later on imposing its strong ‘anti-bailout, we might leave the euro’ views at a later date. With the speed which European politicians are acting, the party may get a chance to rule after all. Let’s see what Europe offers any new government as concessions for adhering to the current programme.

Focus still on central bankers to revive hopes of policy action to stimulate markets. Like G20, they say ready to take necessary measures. Let’s see if the US Federal Reserve (Fed) fed is any more worried and prepared to pull the trigger. QE3? An extension to operation twist (programme to reduce long-term borrowing costs)?

Macro data limited to Japan overnight, but showed an improvement in indicators. Asia-Pacific markets in the red unmoved by G20 and still concerned by Europe (quite rightly so, in my opinion). A rare positive is the IMF saying its crisis-fighting war chest has seen pledges bolstered from $430bn to $456bn. In the words of a UK supermarket, “Every little helps”, I suppose

Looking to FX and commodities, USD weaker overnight versus GBP and EUR. Markets less worried? Less needy of a safe haven? Or more concerned that the Fed will print more money (QE) to stimulate US economy/financial markets. Gold a touch higher (weaker dollar means you get more of it for your own currency.

Macro data likely focused on Spain’s short term debt auction. How much (yields) will it have to pay? Is it any closer to a full bailout? UK inflation of interest as potential ammunition for rate cuts/more QE from the Bank of England (BoE). Back in Europe, Eurozone Construction data may give signs on infrastructure spending within national growth programmes. Germany’s ZEW surveys keenly watched, as usual, with expectations for declines on the prior month.  US Housing data (Starts and Permits) always analysed for signals of US optimism.

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

• Japan               Leading Index                          Improved
• Japan               Coincident Index                     Improved
• See Live Macro calendar for all details

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

• Whitbread sales boosted by Costa Coffee growth
• Polyus Gold admitted to London Stock Exchange premium listing
• Home Retail says Argos sales fall slows
• Evraz sees average annual capex of $1.5bn to 2016
• Hammerson sells London office assets for £518m
• Chemring Group profit -21%, on track to meet FY expectations
• Kentz Corp trading in line with revised guidance
• Imagination Tech profit +53%, remains confident
• International Ferro gets extended loan facility

Morning Press Selection:

• Greece has won Europe a respite – now it must use it – FT.com – Columnists http://on.ft.com/NHwLyz
• UK economy manufactures rebalancing act – FT.com – UK Economy http://on.ft.com/Lx7UJe
• Will hungry Greek bear dance to EU tune? – FT.com – Opinion http://on.ft.com/M51Olh
• Eurobills may drive past German roadblock – FT.com – Capital Markets http://on.ft.com/NJIaxS
• Endgame brings pressure for fiscal union – FT.com – Currencies http://on.ft.com/Lx2ZYU
• Euro slides as investor attention turns to Spain – FT.com – Currencies http://on.ft.com/KHhmgN
• Time to act: euro collapse would define our era – FT.com – Columnists http://on.ft.com/Lxlbld