UK stocks are expected to register small gains on Tuesday morning following four consecutive declines, though upside is likely to be limited following a deterioration in Chinese economic data overnight.
City sources predict the FTSE 100 will open around 11 points higher than Monday's close of 6,677.52. The index has now lost around 2% over the last four trading sessions.
Data from HSBC showed that the Chinese services purchasing managers' index (PMI) dropped sharply from 53.1 to just 50 in July, meaning that the non-manufacturing sector neither grew or contracted last month.
"Resting precariously on the 50 mark, it is clear that whilst the manufacturing sector has begun strengthening once more, the Chinese services sector remains highly weakened," said market analyst Craig Erlam from Alpari UK. He said that the month-on-month fall was likely driven by the slowdown in the housing market, "where residential prices and demand are seeing a correction after years of runaway growth".
The weak services PMI saw the composite PMI, which measures growth in both the services and manufacturing sectors, fall from 52.4 to 51.6.
'Official' government figures at the weekend showed that the non-manufacturing PMI declined from 55 to a six-month low of 54.2 in July.
After a quiet session in terms of economic data on Monday, Tuesday's agenda is expected to pick up with PMI reading due across the Eurozone, UK and US. Eurozone retail sales and factory orders in the States will also be in focus.
Stocks to watch
Temporary power and temperature control group Aggreko said its financial results for the first half reflected a "significant adverse impact" from currency movements, though its full-year guidance remains unchanged after good underlying growth during the period. Trading profit, which represents operating profit before gains on sales of property, plant and equipment, fell by 10% to £142m in the six months to 30 June, but improved by 6% on an underlying basis.
Strong net inflows helped Standard Life grow assets under administration 4% to £254.1bn in the first half of the year, with revenues, profits and cash all increasing as the investment group's core UK and Europe arm continues to benefit from regulatory, market and demographic changes.
Intercontinental Hotels Group saw revenues decrease by 3% to $908m (£538.33m) during the first six months of the year, while operating profits declined 8% to $310m. Despite the falls, the company unveiled a 9% increase in its interim dividend. Chief executive Richard Solomons justified the higher payout on the basis of a 6% improvement in underlying net profit, together with solid net system growth.