Before the open - 10/07

Unexpectedly weak Chinese trade data last night increased fears of a slowdown in the region, with imports falling 0.7 per cent year-on-year in June (compared with expectations of an eight per cent increase) and exports falling 3.1 per cent (against predictions of four per cent growth). The IMF said yesterday it expected slower growth in China and Japan in the coming years.

Li Huiyong, economist at Shenyin & Wanguo Securities in Shanghai, said:

The surprisingly weak June exports show China's economy is facing increasing downward pressure on lackluster external demand. Exports are facing challenges in the second half of this year.

The appreciation of U.S. dollar and the Chinese government's recent crackdown on speculative trade activities also put pressure on exports.

However, the Shanghai Composite Index has remained surprisingly strong, currently up over 2.0 per cent after a slight fall, with Citi analysts suggesting this could be to do with Chinese whispers about a rate cut.

The Nikkei, however, fell 0.39 per cent to finish at 14,416.6.

The FTSE broke above the 6,500 mark yesterday, and analysts are split over which way it will go this morning. Moody's upgrade of the outlook for UK banking just now could push it higher than expected.

Key events today

0745: French industrial output (May)

0900: Italian industrial output (May)

1100: Portugal CPI (June)

1200: US MBA mortgage applications (5 July)

1900: US Federal Open Market Committee minutes

2110: US Federal Reserve chairman Ben Bernanke speech

Vince Cable expected to outline plans to sell off the Royal Mail