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

UK 100 called to open -10pts at 6510, with yesterday’s 2% pullback from fresh 10-month highs and breach of steep 6-day rising lows finding overnight support around 6500 before delivering a mild bounce. So long as this level holds, bulls are hopeful of seeing another rally back to the highs and beyond. The bears, though, aren’t sure a 2% retrace is enough to digest a 15.6% rally, hoping that a breach of 6500 can deliver further downside via a bearish head & Shoulders top formation. Watch levels: Bullish 6535, Bearish 6495.

A negative open comes after a down day in Asia, following yesterday’s negative European lead with US markets being closed for a holiday. Caution has seeped back into markets fuelling demand for haven assets like precious metals, bonds, high-yield equities, weak-sterling beneficiaries and the Japanese Yen as markets await concrete details about what central bank action could be on its way to support markets and economies post Brexit. 

Australia’s ASX is leading Asian bourses lower with a worse trade deficit and slower retail sales growth than expected offsetting an RBA leaving interest rates unchanged (expected). Some weakness in the commodity space is also weighing. Japan’s Nikkei struggling under the weight of a stronger Yen currency while Chinese equities buck the trend to trade flat.

US futures traded positive yesterday on very low Independence Day volumes, with ‘stock markets proper’ closed. They’re back open again today.

Crude oil prices are back well below $50 after Nigerian production was ramped up afresh, tipping the balance of drivers further towards the bearish. Bulls will look for support not far below current levels - $49.25 for Brent and $48 for WTI - to hold firm with some decent China PMI data holding up market sentiment, while bears will note wide falling channels since 9 June.

Gold has broken below the rising trend line from 24 June on a little bounce in the USD Basket  (DX). The Dollar continues to retreat from its highs, however. Support at the 50-hour moving average, with a break below putting another $10 of declines towards the 100-hour moving average on the cards. On the other hand, any risk aversion in equities could send the yellow metal back for a retest of $1352. Note Silver has given back half of the 8.6% of gains it made in the last two trading days.

In focus today will be June PMI Services data from the Eurozone and UK, with Italy seen returning to growth but France making a worrying fall back into contraction. Germany, the Eurozone and the UK are all expected to have given up some ground in June, but still growing comfortably, before Eurozone Retail Sales continue their rebound in May (from March’s near 2yr lows) to get the region’s annual growth print off its 12-month lows.

Before lunch, we get the Bank of England’s Financial Stability Report which could see it detail the financial risks faced by the UK following the recent Brexit vote. We may also get details about how it plans to ease the capital burden on banks, to keep financing alive for businesses and households and the economic consumer and business confidence ball up in the air. The press conference by Governor Carney will be a much-watched event for any hints about what stimulus is coming our way this summer.

In the afternoon, look out for US Factory Orders seen falling in May while Durable Goods Orders growth (both headline and ex-transport) remain weak before the Fed’s Dudley speaks in the evening at a Chamber of Conference roundtable discussion. Any hints about a Brexit-weakened GBP (and thus stronger USD) preventing the Fed from near-term rate hikes may also please markets.

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

• Adept Telecom full year revenue up 30.9%
• Asian shares slide as investors ponder stimulus outlook
• UK builder Persimmon says too early to judge Brexit impact
• Connect Group says forecasts remain in line with market expectations
• Marshalls says H1 revenue up 2%
• Wizz Air says June load factor increases slightly
• Imagination Technologies posts FY loss
• Meggitt training unit wins $18 mln contract in Australia
• Ryanair traffic rose 11 pct in June, load factor 94%
• Copper eases for 2nd day on concerns over Chinese demand
• Oil prices dip on economic concerns, demand worries