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

UK 100 called to open +20pts despite a slightly negative close for US markets following weak US data and a weak PMI Manufacturing figures out of China overnight. While not good to see this emerging nation’s factory output slowing, it piles more pressure on its policy makers to take stimulus action to avert a ‘hard landing’, something which would likely benefit risk appetite for equities and commodities. Worries that US slowing too is all adding to the unhealthy mix.

There is also positive sentiment from; expectations Ireland will vote in favour of Europe’s new fiscal compact, allowing it access to the permanent bailout fund should it need it the future; a story reporting that the IMF had started discussions con a contingency plan for Spain should it be unable to raise the funds needed to bailout Bankia; opinion polls from Greece suggesting pro-bailout parties in position to form coalition; ECB office suggesting more LTRO (liquidity boost to banks) is possible.

Asia-Pacific markets mixed, but largely dented by the weak Chinese data which maintained the negative trend of macro data from the US in the afternoon (GDP revision, Jobless stagnant, Chicago PMI misses expectations), which untdid the good run of European data yesterday morning (nice to see after the poor data through most of May).

Safe haven seeking has seen a rush to currencies and Government bonds. Moves into the USD have seen EUR/USD fall to test 1.235, while GBP/USD remains below its prior rising support line of 3.5yrs. Moves into the USD have maintained pressure on commodities (denominated in USD) with Gold kept gold failing at $1,585/oz and US Crude Oil dropping back to test $86/barrel. Remember when it was well above $100? In the world of bonds, UK, US and German benchmark 10yr government bonds are all yielding historic lows, with the focus being capital preservation, even at the expense of inflation.

Macro data will be flowing thick and fast today with more PMI Manufacturing, this time from the Eurozone and UK, where preliminary figures were bad (well below 50) across the board. Thereafter Eurozone unemployment will be looked to as consensus us expecting a rise. Then the big one. US Non-Farm Payrolls. After two bad months (missing consensus by a fair margin), will the US add the expected 155K jobs. This is still below the 200K additions needed every month which would signal the US economy is recovering. To close the week we have US ISM Manufacturing. While also likely to cool a touch, it remains well above the critical 50 growth/contraction level .

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

• China               PMI Manufacturing                Worse, but still >50
• China               HSBC PMI Manufacturing       Declined
• Japan               Vehicle Sales                           Strong growth, but slowing
• See calendar for all details

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

• Great Portland Estates makes £39m purchase in St James’s
• BP looks to sell stake in TNK-BP
• John Lewis weekly sales boosted by online growth

Morning Press Selection:

• China’s factory output weakens – FT.com – Asia-Pacific http://on.ft.com/KCDPJV
• US data show loss of momentum – FT.com – US Economy http://on.ft.com/LZBmbF
• Spain faces extra risk to funding costs – FT.com – Capital Markets http://on.ft.com/Ki6KnB
• Europe must prepare an emergency plan – FT.com – Opinion http://on.ft.com/JwLhSl
• German calm belies vibrant eurozone debate – FT.com – EU Economy http://on.ft.com/JwmttR
• Spain reveals €100bn capital flight – FT.com – Europe http://on.ft.com/JvR2Qr
• Moves that bode ill for bond markets – FT.com – Capital Markets http://on.ft.com/M3n3ms