Before the open - 03/07

Asian shares continued to fall last night, with the Nikkei yo-yoing - falling below the 14,000 mark, then briefly pulled up to its highest point in five weeks at 14,164.77 on the back of a weaker yen and stronger dollar, before closing 0.31 per cent down at 14,055.56.

Source: Yahoo Finance

Chinese markets continued to be pummelled by fears of a slowdown, with Markit’s measure of PMI for June coming in at a modest 50.3 (slightly up from 50.2 in May, above 50 indicates growth), dragged down by its faltering construction industry. The Hang Seng index closed down 2.48 per cent at 20,147.31.

Nomura analysts have warned that Asian countries may be overloaded with debt, with Asia’s private debt to GDP ratio at 167 per cent – higher even than in the run-up to the crisis in 1996 when it hit 127 per cent.

According to their analysis, China, Hong Kong, India and Indonesia are all in the high risk danger zone. In particular “China, Hong Kong, Singapore, South Korea and Malaysia exemplify the ‘5-30 rule’ of high leverage that can precede financial crises”. (Note: The 5-30 rule is a term Nomura uses to describe the phenomenon of financial crises in large economies usually being preceded by the leverage ratio rising sharply by 30 per cent of GDP in the five years before the crisis is triggered).

Source: Nomura

The FTSE and other European markets are expected to open down again today.

Key events today:

0813: Markit services PMI Spain (June)

0843: Markit services PMI Italy (June)

0848: Markit services PMI France (June)

0853: Markit services PMI Germany (June)

0858: Markit services PMI Eurozone (June), Markit PMI Composite Eurozone (June)

0928: Markit services PMI UK (June)

0930: Bank of England Credit Conditions Survey (Q2)

0930: CQC chiefs give evidence to Health Committee following complaints at Furness General Hospital

1000: Eurozone retail sales (May)

1200: US MBA mortgage applications (June)

1315: US ADP employment change (June)

1330: US initial jobless claims (June)

1330: US trade balance (May)

1500: US ISM non-manufacturing PMI (June)

1500: US secretary of the Treasury Jacob Lew speech