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

UK 100 called to open +15pts (near 1 month resistance around 5,700), after Asia-Pacific markets pushed higher following a string of positive earnings reports from the US (BNY-Mellon, Bank of America, Blackrock, Honeywell, AMEX, eBay) where revenues were mostly light, but profits beat, suggesting profitability improving despite tough economic conditions. IBM, often viewed as an economic barometer published results which were weaker than expected at the top and bottom line, however, it pleased markets by raising full-year guidance.

US housing data also showed a hike in starts, which boosted sentiment and helped US markets close higher. US Federal Reserve (Fed) Chairman Bernanke’s 2^nd day of testimony also bolstered the positive mood (perversely) with, as we suggested yesterday, more downbeat comments serving to convince that more monetary stimulus (money printing/quantitative easing/QE) just round the corner which increased risk appetite. The US Beige book also helped this view, by showing regional growth slower in June/July.

After Portugal managed to issue short-term (6/12 month) sovereign debt at lower rates, can Spain follow suit this morning with its auction of €2-3bn of 2, 5 and 7yr bonds? With the country having earmarked a bailout under less onerous terms, the yields paid will be key. However, a look at the benchmark 10yr yield (near 7%) in the secondary market still implies the country still in real trouble. With France joining the negative yield club (investors paying to have money parked in sovereign debt) its sale is unlikely to cause much fuss.

Traders today likely focused on UK Retail Sales figures for June. With inflation figures having already shown a calming thanks to discounting by retailers and flaling energy costs, we may see this volatile data print show some weakness despite expectations that the Jubilee would provide a boom. Thereafter, it’ll be the US which rules the afternoon with more manufacturing survey results from the Philadelphia Fed, US jobless and then yet more housing data (consumer sentiment).

The US corporate results deluge continues with the likes of tobacco manufacturer Phillip Morris, investment bank Morgan Stanley, Telecoms giant Verizon (linked to Vodafone via JV), and tech stocks Microsoft and Google.

In FX and commodities, Gold maintaining its bounce from yesterday’s lows after the US dollar strengthened on Bernanke keeping the door closed on more QE, despite his gloomy outlook (it should weaken the USD on expectatinos of more money printing). The price of Oil (US Light Crude and Brent Crude) continues to benefit from geo-political factors (previously Iran, this time Syria) with less impact from the USD. In FX, GBP/USD and EUR/USD remain near recent highs/resistance. USD/JPY making new lows in search for safehaven.

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

• Aussie              NAB Business Confidence       Deteriorates
• Japan               All Industry Activity Index       Contraction, as expected
• Japan               Coincident & Lead Indices      In-line
• Switz                Trade Balance                         Better
• See Live Macro calendar for all details

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

• Britvic rev falls on poor weather, Fruit Shoot recall
• JJB Sports in talks with partners after sales slide
• Lloyds agrees to sell 632 branches to Co-Op
• Kingfisher Q2 underlying sales -0.4%
• Halfords says environment difficult, CEO steps down
• Paragon Group 9 month profit +17%
• Mitchells & Butlers year-to-date sales +1.9%
• Gulf Keystone upgrades oil in place estimates
• Sports Direct year profit +10%
• Heritage Oil says OML 30 Nigeria reserves exceed estimates
• Shanks sees in-line underlying trade for next year
• Mothercare sales fall in the UK

Morning Press Selection:

• Rate probe turns to four major banks – FT.com – Banks http://on.ft.com/NOzZtZ
• Euribor probe focuses on Barclays trader – FT.com – Banks http://on.ft.com/NHkycn
• Greek leaders identify two-thirds of spending cuts – FT.com – Europe http://on.ft.com/NAt8HJ
• Samaras’s challenge – FT.com – Editorial http://on.ft.com/Mmge0K
• Inflows point the way to intervention by Tokyo – FT.com – Currencies http://on.ft.com/ObypEw
• Screws tighten on European banks’ funding – FT.com – Capital Markets http://on.ft.com/OGSnoE