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

UK 100 Index called to open -25pts at 6075, in retreat from yesterday's highs of 6100 although off the overnight lows of 6030. While this puts the index in a tentative sideways channel, and potentially in consolidation mode, we note yesterday’s failure to challenge Friday’s 6115 highs which adds to the dominant 9-month trend of falling highs and could hinder further progress of February’s uptrend recovery. Watch levels: Bullish 6090, Bearish 6050.

The negative opening call comes despite a positive session in Asia overnight, with European traders focused on disappointing PMI data from Asia after China’s official PMI Manufacturing extended its deterioration (a reading below 50) to a record 7 months, the Services gauge fell to a 7yr low and Japan’s Manufacturing print fell closer to breakeven. Note weak China PMI manufacturing has coincided with the last three UK Index sell-offs (Dec, Jan & Feb).

Even if a Lunar New Year effect likely played its part in China’s  soft data, the unavoidable downtrend shows the work that authorities have to reboot a flagging economy (slowdown worsening?), requiring more stimulus such as yesterday’s cut to the Bank Reserve Requirement Ratio (RRR) to free up more money for lending. But is there even more on the way?

Japan’s Nikkei benefiting from a weaker JPY, although underperforming regional peers. Chinese stocks bouncing in reaction to yesterday’s post-market RRR cut. Australia’s ASX positive thanks to a weaker AUD after much weaker than expected Building Approvals data and Reserve Bank of Australia holding policy unchanged, albeit with a slightly dovish tilt.

US markets closed negative, brushing aside gains in the oil price (tired of all that production freeze chat?) to concentrate on some lacklustre macro data - Dallas Fed Manufacturing missed consensus but improved on the last print, while perhaps more importantly we saw the February Chicago PMI dip below 50 (50 being the watershed between expansion and contraction).

The Fed’s Dudley’s outlook for the US economy is at risk of being downgraded, he says, since downside risks have increased somewhat recently. That would appear to be reflected in the data, but the data is nearly as volatile as the markets, so it’s hard to be certain on that one.

In focus today we have European PMI data with expectations for growth by the major components (France, Germany) keeping the region above water. German Unemployment is likely unchanged, while the UK’s PMI Manufacturing may have edged back a bit, in contrast to the US which may have ticked up slightly.

In oil news, it’s looking increasingly unlikely we’ll see production controls implemented in June, since OPEC sources indicate it will be too early to gauge how quickly Iranian output is growing. A desire to ‘test’ Russia’s commitment to any plan is also likely to delay progress. So they’ve agreed to freeze production one day, maybe. Nonetheless, it’s clear that belief in this proposed plan is still there as crude prices continue to trend up from mid-Feb lows..

Gold has managed to climb back into its late Feb rising channel overnight, perhaps buoyed by the disappointing Chinese PMI data, yet mainland markets look to have brushed this aside such that the yellow metal is off its earlier highs. Plenty of support though as we head into the European session, with bourses called slightly lower this morning.

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

• Glencore says FY adjusted EBITDA -32% to 8.7%
• Barclays says FY profit -2%, to sell down stake in Africa unit
• Barclays' total bonus pool -10% to £1.67bn
• Elementis says FY sales $678.8m
• Barclays says cooperating with U.S. regulators on probe into Asia hiring
• Moneysupermarket.com says FY adj oper profit £100.1m
• United Utilities, Severn Trent to form joint venture
• Tullett Prebon sees ICAP deal to close in 2016
• Tullett Prebon FY operating profit £107.9m
• Rotork FY adj oper profit -20.3% to £125.3m
• Wood Group wins $120m contract with Babcock
• Smiths Group says concludes pension funding exercise
• Regus FY profit rises, remains confident on 2016 prospects
• UK baker Greggs forecasts more growth as profit +25 pct
• Taylor Wimpey full – year profit rises
• Insurance broker JLT's FY underlying pretax profit -7%
• Direct Line posts above – forecast 2015 operating profit of $726 mln
• Just Eat says trading strongly in 2016