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

UK 100 called to open +30pts at 6865, continuing its recovery from a late test of recent support on Friday following mixed US data, helped by weekend data showing China’s official PMI Manufacturing expanding at its fastest pace in five months - a sign that government stimulus to reignite the slowing economy is delivering – boosting investor sentiment and seeing them start the new month on the front foot.

This is on top of China saying it will cut some banks’ reserve requirement ratios (RRR) to foster growth, China State TV saying the PBOC will set a up a re-lending facility for smaller companies and the UK’s Telegraph reporting that China is exploring bond buying in its first hint at Quantitative Easing (QE) as money supply weakens and bad debts accumulate amid the clampdown on credit expansion.

US markets closed around breakeven on Friday, but not before after recouping losses and stretching to fresh record highs. Mixed macro data showed a strong Chicago PMI offset by weak Personal Consumption Expenditure (PCE) and Consumer Sentiment (Uni of Michigan) which added to the weak GDP revision earlier in the week.

Fed speakers included Williams seeing a rate rise next year and a rate as high as 2.5% by end-2016 (currently 0.25%) while colleague Evans said highly accommodative stance appropriate to reach inflation and employment gaols and Mester said price stability is key to achieving full employment goal and a deeper understanding of inflation dynamics during return to more normal policy.

May closed with equities worldwide up for a fourth month, the technology rout erased and the S&P500 Index reached a record as economic growth picked up and tensions between Ukraine and Russia eased.

Overnight, Asian markets positive (CN, HK, NZ closed) thanks to Chinese data along with data which included an improvement in Aussie PMI Manufacturing, stable Japanese PMI Manufacturing and better quarterly Japanese Capital Spending although Aussie Building Approvals, House Prices and Inventories dropped as sharp falls in consumer confidence begin to hurt.

In focus today we will mostly be watching final PMI Manufacturing readings from Europe and the US with US ISM Manufacturing potentially adding weight to the former and German Consumer Price Inflation increasing expectations of ECB action on Thursday. UK Consumer Credit and Mortgage Approvals always of interest given the importance of the property market.

 UK 100 still in uptrend and aiming for recent highs supported by great global expectations that the ECB weighs in with large scale easing measures on Thursday to counter the threat of low inflation/deflation (with the quasi-blessing of Germany’s Bundesbank head Weidmann) as well as the launch of a Spanish economic stimulus package worth €6.3bn to help fight the threats of deflationary and sky-high unemployment.

In commodities, Gold has extended its biggest weekly drop since March (testing $1240) after the S&P500 climbed to a record and hedge funds pared bets on a rally in the metal at the fastest pace this year as demand for a haven declined amid positive macro data and easing Ukraine tensions. As mentioned last week, technicals also playing their part.

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