The FTSE is set to edge around 10 points higher early on, lifted by better than expected data from China and continued gains in the price of oil as traders await to see whether or not the West will take action in the deepening crisis in Iraq.
According to the revised HSBC/Markit manufacturing Purchasing Managers' Index (PMI) Chinese output showed a rise for the first time in half a year, prompting gains across Asian indices.
Capital Economics said: "Today's PMI reading is the latest sign that, in some sectors at least, downwards pressure on growth has largely eased. HSBC/Markit's manufacturing PMI rose from 49.4 in May to a seven month high of 50.8 this month, according to the flash reading. This was much stronger than most had anticipated."
The situation in Iraq is also very much in focus, with investors awaiting the response of officials following requests from the Iraqi government for military assistance.
Joshua Mahony, an analyst at Alpari UK, said: "Despite these positive figures out of Asia, Europe is looking somewhat nervously across to Iraq, where the expansion of ISIS held territory means that the US and Western forces are becoming increasingly caught between a rock and a hard place in relation to potential military involvement.
"The capture of border crossings into Syria means that there are now sections of the border which ISIS militants can cross freely from war torn Syria."
He also noted that it is set to be another fairly quiet week although busier than last, with a number of releases due out, including final first quarter US gross domestic product (GDP) and the Bank of England's financial stability report on Thursday. Multiple PMI releases are due out this morning from the Eurozone.
"The ongoing conflict within Iraq is also a major theme going forward, where any military involvement from the US is likely to lead to a flight to safety in the form of risk-off sentiment," Mahony said.
In this morning's company news, biopharmaceutical firm Shire is to host a call with investors today in an attempt to build its defence after rejecting a £27bn takeover bid from AbbVie last week. In a similar move to AstraZeneca and Smith & Nephew who have both resisted takeovers after attracting foreign interest in recent months, Shire is expected to launch a charm offensive to convince shareholders that it continue as an independent company.
Defence services firm Ultra Electronics said its New York-based EMS Development Corporation business has secured a $21m multi-year contract to produce naval computer controlled power supply systems for General Dynamics Electric Boat. Ultra designs shipboard power conversion equipment for submarines and surface ships and has designed and manufactured hundreds of systems to navies worldwide including the US, the UK Australia, Canada, Spain, and Korea.
ASOS customers resumed online shopping this morning after a fire at the retailer's main warehouse in Barnsley forced the company to suspend its website. ASOS said that the warehouse is "the centre of our distribution capability". As of May 31st, the business held £159m of stock at cost, of which around 70% is held at Barnsley. The company said it estimates that 20% of the stock was "compromised by fire damage and the sprinkler systems".
AIM-listed radiation detection technologies supplier Kromek landed a contract with the US Defense Threat Reduction Agency for the design, manufacture and optimisation of high sensitivity, next generation, solid state detectors for the homeland security radiation detection market. The contract is worth $1.45m to Kromek over the next two years and will begin next month.