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

  UK 100 called to open flat at 6325 after a negative day in Asia, as sentiment dented by an FT article suggesting the Fed might signal a QE3 tapering move on Wednesday (USD positive), with many asking whether there had been an FOMC leak, although the author clarified things by saying it was just his opinion and that subsequent moves would likely depend on economic data (not that different to the Fed’s May message).

 Overnight data kept Asia back with China Property Prices, Foreign Direct Investment and Leading Economic Index slowing, although annual property price rises fastest in over 2 years, increasing fears of new curbs and denting the property developer sector.

 Japan’s Industrial Production growth slowed too, and Machine Tool Orders remained weak, although Capacity Use rebounded (better capacity use, but worse output, not a god mix). This morning’s EU New Car Registrations were very weak, hitting a 20-month low. RBA minutes showed inflation outlook allowing scope for further rate cuts.

 US markets closed higher after better than expected Manufacturing and Housing data, the latter jumping to a level unseen since April 2006. Gains nonetheless held back by aforementioned FT article suggesting a QE3 taper and a warning from Syrian leader to Europeans arming rebel forces.

 On the QE3 tapering front, as we have said repeatedly, 1) tapering remains to be quantified; 2) Are we to be scared of Fed asset purchases of just $80bn/month v current $85bn?; 3) We could see a taper and then stay at $80bn for many months; 4) Bernanke has flexibility to increase again if economic data deteriorates; 4) Tapering doesn’t mean that rate rises are round the corner, 5) the Fed may hedge itself by signalling a plan to taper in September, but only if data warrants it.

 Back in Europe, some positive sounds from Greece with sources saying PM Samaras offering concessions to coalition partners allowing restart of Greek national TV station and a cabinet reshuffle at the end of the month with updated coalition agreement. The G8 Summit says Economic prospects have improved (thanks to CB intervention) and downside risks reduced, but remain weak. The IMF approved Ireland’s next portion of aid.

 In focus today will be the UK Inflation data, with CPI seen up a notch in May although input/output prices seen unchanged. RPI seen cooling a touch. Germany’s ZEW Surveys seen improving. US inflation so remain benign, while Housing starts rebound in May and Building Permits weaken after strong April. G8 summit continues with the focus moving to tax today.

 UK 100 tested highs of late last week, but couldn’t make much headway. After break above two falling trendline, a third higher low is another good sign in terms of rebound. Support still 6280, resistance 6370. We still await a break of 6350 and 6430 for further evidence of uptrend revival.

 In FX, GBP/USD turned down below 1.57 on FT article suggesting QE3 tapering signal this Wednesday benefiting the Greenback. Still trading around 3-month highs. Same story for EUR/USD with a fall back below 1.335, and after a semblance of topping out. USD/JPY still has support at 94, but struggled to get above 95 overnight.

 Gold taken a dip below $1380 on the stronger USD on prospect of tapering message on Wednesday. Resistance still from 200-day moving average $1388, which is now declining daily after the April declines and recent sideways move by the yellow metal.

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

• China               Property Prices                             Slightly slower growth
• China               Foreign Direct Investment      Slightly slower growth
• Japan               Industrial Production              Slower growth
• Japan               Capacity Use                                Improved, rebound
• EU                    New car Registrations              Deteriorated
• Japan               New Tool Orders                     Unchanged, still weak

See Live Macro calendar for all details

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

• Crest Nicholson confident on FY as profit rises
• Chemring says outlook for current year is towards lower end of expectations
• African Minerals says achievement of 20mtpa export rate
• SDL warns on year profit
• Galliford Try wins contract with Manchester Airports Group
• SABMiller enters in agreement with Kopparberg Cider
• EasyJet to expand fleet with Airbus A320, A320neo aircraft
• Costa Coffee demand helps Whitbread to first-quarter sales rise
• Aggreko on track for first half as rental business performs