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

UK 100 called to open +15pts, maintaining upward bias of last week, but off overnight highs. Hopes remain high that European Central Bank (ECB) and US Federal Reserve (Fed) meetings this week will provide stimulus markets have been pining for.

After ECB President Draghi pledged last week to do all that was necessary to calm bond markets (namely Spain and Italian borrowing costs) in order to preserve single-currency Euro, others (Merkel, Monti, Hollande) have joined him over the weekend, pledging to work with him to do so.

I still don’t like the timing of this. All too perfect to buy some time ahead of the traditionally quiet month of August. Ratings agency Moody’s (the grim reaper last week) is of the same opinion, believing the ECB can buy the region time, but cannot solve the crisis.

Possible ECB action include rate cuts (already had one), and other round of cheap loans (already had two LTROs), direct bond market intervention (not really allowed by mandate), or a banking license for bailout funds to borrow whatever they need to intervene in bond markets.

Overnight, macro data showed an improvement in the Lloyds Business Barometer in July, however, the UK Housing market remained flat. In Asia, Japanese Industrial Production in June contracted sharply. The latter offers speculation of the Bank of Japan (BoJ) easing policy to help growth.

This week’s focus on the central banks ECB, Fed and Bank of England (BoE). The first two could act but are unlikely, with the ECB still preferring EU leaders to act first and the US reported in-line GDP which may have eased pressure on Chairman Bernanke who may also want to wait for Friday’s unemployment data in the form of July US Non-Farm Payrolls (NFP). The third as already acted recently with more asset purchases (quantitative easing; QE), and even after awful preliminary UK Q2 GDP, is unlikely to act again so soon.

Today’s focus (in a thin calendar) likely to remain on Draghi’s comments and pending action. Data-wise, UK Consumer credit, Eurozone Confidence surveys, UK Sales trends and Dallas Fed Manufacturing Index are the big numbers to watch. The results of Italy’s bond auction likely to show acceptable yields following last week’s Draghi comments. For those who trade the banks, HSBC reports its H1 results at 9:15am, before RBS on Friday.

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

• UK                    Lloyds Business Barometer     Improved
• UK                    Hometrack Housing Survey    Flat
• Japan               Industrial Production              Worse 
• See Live Macro calendar for all details

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

• Reckitt Benckiser reassures on earnings after rival’s problems
• Keller first-half profit triples, sees stronger second half
• Diploma year to date underlying revenue +7%
• Glencore says Viterra noteholder meeting cancelled
• Insurer Hiscox swings to profit as catastrophes abate
• Premier Foods completes sale of vinegar, pickles business to Mizkan
• National Grid starts year well, maintains positive outlook
• Gem Diamonds reports higher production
• Fidessa Group H1 pre-tax profit £21.7
• Anglo American H1 profit -38%
• Brewin Dolphin says Q3 income +4.4%

Morning Press Selection:

• EU business rivals divided by rates – FT.com – EU Economy http://on.ft.com/NdCAOb
• ECB stirs expectations ahead of summit – FT.com – EU Economy http://on.ft.com/Qq0OMB
• Move to break links with banks – FT.com – EU Economy http://on.ft.com/Pdmcxt
• IMF can end its agony over Greece – FT.com – Editorial http://on.ft.com/M2ZdVD
• Europe’s political union is an idea worthy of satire – FT.com – Opinion http://on.ft.com/PXR5dk
• A ceremony for barmy Britain and a baffled world – FT.com – Comment http://on.ft.com/PY39eI
• Chinese slowdown becomes painful – FT.com – Asia-Pacific Companies http://on.ft.com/PVDqnc
• Economic Outlook: central bank hopes fade – FT.com – Markets http://on.ft.com/Os3DuI