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

UK 100 called to open +20pts, with Asian shares oscillating around breakeven. This follows yesterday’s very negative start to the week, on Spanish regional and sovereign bailout fears (to go along with its banking one) and Moody’s last night warning on eurozone core (cutting AAA-rated Germany, Netherlands and Luxembourg’s outlook to negative from stable, joining France and Austria).

Risk appetite assisted overnight by a better than expected print from the China HSBC Flash Manufacturing PMI (5-month high), reducing fears of the emerging nation making a crash landing in terms of growth. Its Conference board economic indicator was also flat. Better than a decline.

Eurozone woes still very strong, keeping EUR/USD depressed (but off their worse levels), with the knock-on effect of a preference for the USD as a safehaven keeping a lid on the price of commodities such as Oil, Gold, Silver.

Moody’s action based on rising uncertainty regarding Eurozone sovereign debt crisis, with likelihood of Greek exit having increased (struggling to implement reforms; Troika back in Athens today) with material risk to single currency, and bloc’s more solid countries needing to provide support to weakest. Finland left as only AAA-rated eurozone country with stable outlook thanks to ‘unique credit profile’ – it demands collateral in return for bailout funds.

Today sees Spain auction sell 3 & 6 month debt which could well be a struggle. Its benchmark (10yr) yield (interest rate/borrowing cost) is already 7.5%, and 2yr rates are not far behind. These rates are not sustainable for a sovereign to borrow, payback and rollover in order to finance its excess spending.

Spain’s devolution of power from the 1970s and real-estate collapse/spending party looks to be coming back to haunt it. The sovereign may have to take power back at the cost of a national bailout, something it thought it might get away with if banks could be treated separately.

Macro data to keep an eye on today is the PMI Manufacturing & Services data from Europe which was disastrous last month (all sub-50, in contraction), the Spanish debt auction, UK home loans, and US PMI, Richmond Fed and Housing in the afternoon. US corporate results continue with the likes of UPS (economic barometer, given flow of goods) and Apple.

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

• China               Conf Board Leading Econ Index          Flat
• China               HSBC Flash Manufacturing                 Improved
• See Live Macro calendar for all details

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

• Carpetright sales boosted by beds
• Berkeley Resources – Agreement with ENUSA
• Connemara Mining gets positive results at Wicklow
• Rosneft enters talks with BP to buy TNK-BP stake
• Globo sees H1 profits ahead of last year
• CSR posts better-than-expected Q2 results
• Man Group cuts $100m of costs as assets tumble
• Telecoms: Ofcom unveils 4G auction to kick start high-speed mobile
• Broadband and TiVo lift Virgin’s results
• Imperial Tobacco sees growth as 2011 problems fade
• Kofax sees FY EBITA of at least $40.2m
• APR Energy sales up, sees strong emerging mkt demand
• International Ferro Metals reports lower ferrochrome production
• Pace H1 profit before tax $21.4m
• Rolls Royce to power Norwegian ferries with LNG engines
• Keller wins $41m deal on U.S. transmission line project
• Croda International posts higher profit, ups interim dividend
• Morgan Crucible profit falls on weak engineered materials rev

Morning Press Selection:

• Moody’s warns eurozone core – FT.com – Europe http://on.ft.com/OjWOYG
• China manufacturing edges towards growth – FT.com – China http://on.ft.com/OddV0b
• We have entered the world of disaster economics – FT.com – Columnists http://on.ft.com/MEjkze
• Risks extend beyond eurozone periphery – FT.com – Markets http://on.ft.com/LKkhVi
• A slowdown is good for China and the world – FT.com – Opinion http://on.ft.com/PBqqU3
• Europe losing battle against debt crisis – FT.com – Front page http://on.ft.com/PGySOu