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

  UK 100 called to open +25pts at 6340, helped by a positive opening to the trading week in Asian markets, despite an air of caution ahead of Wednesday’s update from the Fed which could provide more signals on the future of QE3 (To taper or not to taper? That is the $85bn question?) which have been worrying markets so much.

While much focus has been on some Fed members being ‘prepared to taper’, what has been ignored was the other half of their statement: ‘prepared to do so if the economic data warranted’. With data still mixed, and after the sharp-sell off of the last few weeks, expectations may have turned (thanks you WSJ’s Hilsenrath) towards Fed Chairman Bernanke dampening concerns, which could provide a fillip to markets.

After the Europe closed just in the green on Friday, US markets closed just the other side of breakeven after a disappointing Uni of Michigan reading (should we really have expected another record?), the IMF cuts its US 2014 growth forecasts, warning of downside risks to outlook, seeing Fed start tapering QE3 next year and the city of Detroit declaring itself insolvent.

 Asian markets positive with Japan’s Nikkei the outperformer (back out of bear market territory) after the USD/JPY found support at 94 following its steep declines of late, and bond markets supported by BoJ buying. India held interest rates after recent rupee plunge stoked inflation fears.

Note recessionary concerns persist in Australia with economists (quoted by WSJ) warning on boom-bust scenario due to slower resources sector investment. China’s equities unperturbed by reports of surge in money market rates and ratings agency Fitch warning on the shadow banking sector under much stress.

Overnight data included more solid UK Housing data, and a rebound (albeit more tepid than expected) in the Japanese Tertiary Industry index and Australian Motor Vehicle Sales.

In focus today will be the US Empire State Manufacturing which is seen recovering to breakeven and the US NAHB Housing Market Index which is seen edging higher. Ahead of Wednesday’s Fed update, all US data will likely be scrutinised for any help in deciphering whether the US Central bank is closer to the beginning of its end-game for the market-prop QE3.

The G8 2-day meeting kicks off today in Northern Ireland with a focus on fighting tax-evasion and better transparency among governments, while this afternoon sees a trio of ECB members speaking which could well move the single currency. Don’t forget the UK Banking Report out on Wednesday, with all the talk of re-privatisation and ethics and the departure of RBS’s Hester and BoE’s Tucker.

UK 100 still trying higher, but yet to make that decisive break. After breaking above falling highs from 28 May, now testing trendline of support-turned resistance from 20 May. Support late on Friday around 6280 another good sign. As we said in our weekly roundup, any decent break of 6350 and move to 6400 could be a good omen for the revival of the long-term uptrend after an almost 10% correction from May highs (see UK 100 focus later).

In FX, GBP/USD still trading near highs of 1.57 although little progress from Friday highs. Topped out, or more subdued concerns on QE3 to keep pressure on USD? EUR/USD off its best levels near 1.34, but with QE3 expectations the likely driver of next few days, although note ECB speakers this afternoon which could affect single-currency. USD/JPY found support at 94.

 Gold still tracking sideways around $1390, hindered by 200-day moving average $1390.

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

• UK                    Rightmove House Prices         Better
• Japan               Tertiary Industry Index            Worse
• Aussie              New Motor Vehicle Sales       Improved

See Live Macro calendar for all details

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

• Rio Tinto prices $3 bln of fixed and floating rate bonds
• Ithaca signs North Sea partnerships with Edison, Shell
• Carillion wins 130 mln stg Oman construction contract
• Majestic Wine year profit edges up
• Lamprell refinances debt
• Geopark says Tarotaro well in Colombia finds oil