* A look at the day ahead from European Economics and
Politics Editor Mark John and Jamie McGeever, Chief
Correspondent, Financial Markets, EMEA. The views expressed are
their own.

LONDON, Jan 6 (Reuters) – Angela Merkel’s Bavarian sister
party, the CSU, holds its party conference in the spa town of
Wildbad Kreuth from 1300 GMT, with the controversy over
migration policy firmly at the top of the agenda. CSU party
chief Horst Seehofer stepped up attacks on Merkel’s open-door
refugee policy at the weekend by demanding a cap of 200,000
migrants a year — something Merkel has refused. Aside from
Merkel herself, conference guests include UK Prime Minister
David Cameron, who will be sounding the German chancellor out
over options for EU reform over dinner.

France is commemorating the victims of the Jan. 7, 2015,
Charlie Hebdo attacks this week, with a series of plaques to be
unveiled at sites of shootings and a ceremony at Place de la
Republique this weekend. The country and its politicians are
deeply divided over what the response should be to the threat on
its soil, as witnessed by the row over a government plan to
strip dual citizens of French nationality in terrorism cases —
a proposal supported by the National Front and until now opposed
by the Left.

Final euro zone PMI services data for December and the
latest consumer morale reading in France will give fresh clues
as to the state of health of the single currency zone’s economy,
but they are unlikely to disrupt the view of a solid but
unspectacular recovery. A slowing in core euro zone inflation
reported yesterday underlines the battle ahead for the ECB as it
tries to revive price growth; but there are also undeniable, if
patchy, signs of improvement such as falls in jobless totals in
Spain and Ireland.

MARKETS (AT 0745 GMT)

Global markets may have stabilized on Tuesday, but that
relief from Monday’s stomach-churning start to the year already
looks to have faded. Stocks are back in the red, with China once
again being blamed. Figures showed that the country’s service
sector, which is expected to replace manufacturing as the
economy’s growth engine, expanded at its slowest pace in 17
months in December. Beijing also allowed the yuan to weaken
further, a reflection of authorities’ concern about the health
of the economy. Add to this the news from Pyongyang that North
Korea claims it has successfully tested a hydrogen bomb, and
investor risk appetite is poor. Japanese stocks and Asia-ex
Japan are down 1 percent, the main European bourses are called
to open down around 0.5 percent and Wall Street down almost 1
percent. Money is flowing into safe-haven government bonds, with
US Treasury yields down as much as 3 bps across the curve, and
the Japanese yen is close to a three-month high against the
otherwise perky dollar. Oil is a whisker from plumbing a fresh
12-year low under $36/barrel.

(Editing by Larry King)

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