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

UK 100 called to open -15pts, with Asian markets looking set to break a four-day rally and close on a downer after another set of poor macro data from China (that’s two days in a row). This time it was Exports/Imports and Trade Balance which showed an unexpected slowing in both imports and exports and thus trade balance, suggesting less demand from the rest of the world and a knock-on drop in domestic consumption – not good with us looking for the emerging nation to hold up global growth.

However, this time the market reaction is negative. Yesterday’s bad data was taken as good news on the presumption that the Peoples Bank of China (PBOC) central bank would be pushed to provide monetary stimulus to kick-start the economy again – supportive of risk assets such as equities/commodities. For a reminder of the reasoning behind this ‘bad news is good news’, see yesterday’s morning report for a full rundown).

The case of stimulus is reinforced, however, with markets having rallied strongly of late, it being Friday and it being August, reasons are aplenty to justify a market breather.

Chinese data undid the positive bias provided from US data which showed an improvement in jobless claims and a narrowing of the nation’s Trade Balance, which promoted belief in growth and less need for stimulus intervention by the US Federal Reserve (Fed) – a case of good news being exactly that.

Today’s focus likely on the UK’s Producer Prices (PPI) which is expected to show input prices rising more quickly than output prices, pressuring UK Manufacturer’s margins. This is nothing new, with UK Trade balance data yesterday showing a widening in deficit linked to a drop in growth from European customers (recession, stronger GBP vs EUR). We see it as unlikely the data surprises to the upside after the poor UK data run of late. Thereafter, US Import/Export data will be looked to in the afternoon.

Corporates results out this morning from German industrialist Thyssenkrup look to show a beat for profits, and revenues in-line. Note that insurance giant Prudential reports at 9:15am. For more information on corporate results, call in to speak to our friendly trading floor.

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

• China               Trade Balance                         Worse
• China               Exports                                    Worse
• China               Imports                                    Worse
• Japan               Capacity Use                           Still weak
• Japan               Industrial Production              Improved on last month
• Germany         Consumer Inflation                 In-line
• See Live Macro calendar for all details

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

• Gulf Keystone says Shaikan appraisal programme completed
• Cobham wins $65 mln contract to supply electronic systems to Boeing
• Dixons Retail buys up minority interest in PIXmania
• UK Coal swings to first half loss on sales slump
• Highland Gold Mining ’12 output on track for 200,000-215,000 oz
• Flybe cautious over full year outlook