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

UK 100 Index called to open -25pts at 6110, having retraced from yesterday’s highs of 6160 and subsequently bounced from its lows of 6080 overnight. This puts the index in a sideways holding pattern, awaiting a breakout or breakdown, although still within a longer term falling channel dating back to October. Watch levels: Bullish 6125, Bearish 6095.

The negative opening call comes after geopolitical risk moved up a gear thanks to North Korea testing a hydrogen bomb for supposed self defense which will only go to make for more tension with its neighbours, while China data disappointed with a pullback in PMI Services adding to Monday’s weakness in Manufacturing, bolstering investor fears about the slowing economy.

Asian stocks remain in the red, after a break-even US close, although China posting gains again thanks to continued state intervention and the prospect of an extension beyond Friday of the selling ban for institutions holding stakes of 5% or greater in order to stem equity market volatility. Further Yuan weakness (lower fix) underscored the PBOC’s need to devalue to boost competitivity as the nation struggles.

Japan’s Nikkei struggling from Yen safehaven seeking hindering exporter equities, while the Aussie ASX factors in a stronger USD, and weaker outlook for commodities and their miners after the China data. No help from hopes of more Beijing stimulus. Copper retraced along with Nickel, while Oil tests 1-week lows, although safehavens Gold and Silver remain bid due to Geopolitical tension in the Middle East and now Far East.

In focus today will be the final Eurozone PMI Services readings both regional and component, with all seen ticking back a notch in December, France most worryingly back to breakeven. This after on-the-whole decent Manufacturing reads on Monday gave hope of regional recovery. Watch out for a disappointing Eurozone PPI print piling pressure on the ECB after CPI failed to pick up as hoped for yesterday. Maybe Draghi should have gone for QE2 rather than QE1b.

In the afternoon, with all eyes on US for signals of accelerated recovery vindicating the Fed’s rhetoric of multiples rate rises in 2016, keep an eye on US ADP Employment change seen dropping back below 200K ahead of the all-important Non-Farm Payrolls on Friday. The US PMI Services figure is seen ticking up along with the ISM data although Factory Orders likely weakened in November after the strong October. For those watching Oil, weakly US EIA Crude stocks could add to volatility, while Fed Minutes following last month’s post-crisis rate hike are sure to be scrutinised.

Gold hanging around $1080, above the trend of falling highs that had hindered it since early December and suggesting a pause before further upside. Oil back around 1-week lows, as the boost from geopolitical tensions losses steam as the realisation that Iran will do whatever it wants in terms of returning to oil-supply market, likely against Saudi wishes, the USD rises and the prospect of higher US stocks data on account of mild weather adds to global supply glut worries.

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

• Costain says 2015 order book finished at 3.9 bln stg
• Topps Tiles says 13 – week comparable revenue up 4.4 pct
• Gulf Keystone receives oil payment from Iraqi Kurdistan
• E – Therapeutics names Iain Ross as non – exec chairman
• Card Factory names Karen Hubbard as CEO, says trading in line
• Faroe Petroleum PLC Updated Independent Technical Report