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

UK 100 called to open +100pts after Spain finally bowed to international pressure and formally request €100bn in aid for its battered banking sector and Chinese macro data surprised to the upside. After multiple denials from both the new and old guard administrations, Spain’s announcement comes not a moment too soon with the nation’s financing costs becoming increasingly unsustainable and fears of contagion having been rising by the day.

On the one hand, the €100bn figure and quick decision by Eurozone politicians is good as overkill with politicians having been fiercely criticised for previous bailouts taking too long to agree on, and in some cases not being enough. Less onerous terms (not a national bailout as seen elsewhere) also implies rewards for tough austerity and reforms.  However, with estimates from Spain having risen from an initial €15bn needed to recapitalise the country’s banks to €23bn alone for the disastrous seven-Caja-merger Bankia, the €100bn figure implies problems could go deeper.

Initial euphoria may, as has often been the case, be short-lived (short-covering), with it still being the case that the Kingdom of Spain’s debt burden will still be increased (albeit on generous terms) while the route of the funding may see some parties become more senior in the recovery queue than others (European Stability Mechanism, ESM), potentially scaring away new investors in the nation’s sovereign debt (bonds) and banks. Other bailed out countries not happy (especially Spain) as all have fallen as a result of banking woes, but not been given Spain’s preferred treatment. Ahead of Greek elections next Sunday, cue mass criticism and talk of reneging on bailout terms.

Moving away from Europe’s woes, macro data published by China over the weekend was not as bad as anticipated. After the country’s surprise interest rate cut last week may wondered whether upcoming data was set to be awful and the a hard landing on the way in terms of economic slowdown.

As might be expected, the Eurozone’s single currency Euro (EUR) has rallied overnight on Spain’s request for help, while the US dollar (USD) has weakened as the Greenback safehaven is shunned. Commodities such as Gold and Oil have thus rallied on the weaker USD as risk appetite has recovered.

Asian markets higher on Spain bailout (it is a bailout, whatever they say. It’s not just financial assistance) relief and Chinese exports and imports growing faster than expected.

Over the weekend, macro data not better, but not as bad as some might have expected. UK Employment Confidence unchanged. Japanese Consumer Confidence improved.

Macro data agenda light today, but Italian GDP likely of interest in in terms of Eurozone peripheral weakness.

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

• China               Consumer Price Inflation        Better
• China               Producer Price Inflation          Worse
• China               Industrial Production              Worse
• China               Retail Sales                             Worse
• China               Trade balance                         Better
• UK                    Lloyds Employment Conf        Unchanged
• Japan               Consumer Confidence                        Better
• See Live Macro calendar for all details

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

• Tesco’s UK sales fall as recovery plan struggles
• Flybe sees year profit fall
• Sable Mining gets positive results at KPO project
• Filtronic sees swing to profit on strong broadband unit
• Glencore completes acquisition of stake in Namibian mine
• Galliford Try reaches financial close on waste water joint venture
• Laura Ashley sees underlying sales growth in 2012
• Serco buys Vertex’s UK public sector business
• Mouchel increases cost reduction target
• Aquarius Platinum says Marikana ops to be place on care and maintenance
• Anadarko finds more gas offshore Mozambique

Morning Press Selection:

• Eurozone buys itself some time – FT.com – Editorial http://on.ft.com/KdnewT
• Greek left seeks to exploit Spain bailout – FT.com – EU Economy http://on.ft.com/KY9dCF
• Doubt clouds robust Spain bailout – FT.com – Europe http://on.ft.com/LfQwtV
• Economic outlook: Looking for signs of recovery – FT.com – Capital Markets http://on.ft.com/KZ4cK0
• A way out of the morass? Or pulp fiction? – FT.com – Markets http://on.ft.com/LOQR2x
• The Paid-in Spain http://ftalphaville.ft.com/blog/2012/06/10/1035561/the-paid-in-spain/