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

  UK 100 called to open +30pts at 6640, still buoyed after yesterday’s run at summer highs thanks to a still dovish tone from the Fed’s FMOC meeting last night (growth assessment downgraded, inflation persistently low, nod to mixed data of late) and the official China Manufacturing PMI stayed positive which may allay some of the slowing growth fears.

Stocks in Asia positive after the China PMI stayed above 50, but note that the HSBC figure (often at odds) remained firmly in contraction, falling back below 48. This follows another flat finish my US bourses which came back off their more FOMC statement highs.

The Fed’s latest statement and language supports our thesis (sorry to harp on about it) that the timetable for tapering is destined to be revised as are markets expectations for September. Data remain mixed and with so many variables being considered the central bank is combining maximum flexibility to maintain the status quo for longer, whilst managing expectations and preventing market excitement and asset bubbles which may burst noisily.

The big UK results of the morning are Lloyds Banking Group which posted higher profits than expected (£2.9bn vs £2.3bn est) helped by strong underlying growth and lower costs and likely increasing speculation of a return to full public ownership. Royal Dutch Shell missed on profits, as did BAE Systems. AstraZeneca in-line, while Aggreko saw revenues beat but profits miss. Away from results, RBS have a new CEO from within its ranks after the external frontrunner dropped out.

 In focus today will be the raft of European PMI Manufacturing figures which are mostly seen still knocking around breakeven, with the standouts being UK (well above) and Greece (well below), although Sweden (expected very positive) has disappointed The BoE and ECB update on policy with no changes expected but the former’s statement will be scrutinised given the move to forward guidance while the ECB’s press conference will be as interesting as ever.

In the afternoon, US data comprises jobs data (claims and cuts) along with Manufacturing PMI expected solidly above 50 and Construction Spending growth similar to last month and an improvement in the ISM Manufacturing index and prices paid.

The UK 100 made a break for summer highs of 6660 yesterday but the power of the ceiling proved too much, however, support did emerge at the earlier breakout from falling highs around the round number 6600, meaning another assault is not out of the question. Can data and central banks help out? Nonetheless, the narrow summer range 6550-6660 remains unbroken but the venture higher does show bullish interest and, as mentioned for most of that period, offers potential for the consolidation period to result in a continuation of the June rally.

In FX, GBP/USD fallen below 1.52 on stronger US data (jobs, GDP) increasing expectations of tapering and the prospect of policy divergence between the BoE and Fed helped drive the pair to its lowest in a month. EUR/USD volatile yesterday, but held its ground around 1.325. The Fed has spoken, now it’s the turn of its major CB peers to move the markets.

In Commodities, Gold still under pressure from stronger USD, falling back from $1350 resistance to test of recent rising lows of $1315. Still in long-term downtrend. Support likely at $1300 but fundamental drivers still lacking.

In Oil, US Light Crude and Brent Crude both perked up from recent lows thanks to better economic growth data (US GDP, China PMI) and summer demand form the US driving season.

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

• Aussie      AIG Manufacturing             Deteriorated
• Aussie      House Prices                       Growth slowed
• China       Manufacturing PMI                        Beat expectations
• Aussie      New Home Sales                 Growth Improved
• Aussie      Import Prices                      Contracted
• China       HSBC Manufacturing PMI  In-line, declined
• Japan       Vehicle Sales                       Growth not as weak

See Live Macro calendar for all details

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

• BAE Systems wins $535 mln nuclear arms maintenance contract
• Jupiter says assets reach 29 bln stg
• South Africa’s Investec says April-June operating profit flat
• Aggreko says first half revenue rose 4 percent
• RPS H1 pretax profit rises
• Rentokil CEO Brown to step down in 2014
• Trinity expects trading to remain tough
• RSA Insurance says on track to meet 2013 guidance
• Lamprell says has satisfied conditions to use new banking facilities
• Intu says net asset value per share falls to 377 pence
• Laird first-half profit drops 37 percent to 17.3 mln stg
• Cairn Energy joined in West African offshore blocks by ConocoPhillips
• Thomas Cook swings to third quarter profit
• Robert Walters H1 pretax profit up 19 pct
• BAE Systems profits fall 6 percent on US budget cuts
• Spirent Communications first-half profit drops 72 pct
• UBM H1 revenue from cont operations down 1.5 pct
• United Drug buys Spain’s Expansis for 12 mln euros
• Lloyds considers restarting dividend as turnaround accelerates
• AstraZeneca drug sales fall on patent expiries in second quarter
• Shell Q2 hit by Nigeria, weaker Australian dollar
• Smith & Nephew maintains outlook on wound management strength