Market News

Stocks have spent most of the session drifting sideways in a narrow range near session lows, but they have managed to make a very minor upturn in recent trade. All three of the major equity averages are still trading with losses in excess of 1%, though.
Pressure against commodities also remains stiff and steady. As a result, the CRB Commodity Index continues to contend with a loss of more than 1% as well. A 2.4% drop in oil prices to $97.70 per barrel has weighed heavily on the CRB.

EUR/USD recovers to $1.4052, challenging Asian highs around $1.4048/50 area. Tech resistance and offers mentioned at $1.4080 on any further stretch.

Weakness among stocks continues to bolster buying interest among Treasuries, although the bounce by Treasuries hasn't been anything dramatic. More specifically, the benchmark 10-year Note is up about a dozen ticks. Still, that's enough to take the yield on the Note back toward its 2011 low.

USD/JPY set stable around Y81.80 area in thin market. Offers remain at Y82.00, seemingly a distance away, bids back at Y81.30.

The euro slumped to a record low against the Swiss franc amid deepening concern Europe’s sovereign-debt crisis will worsen, damping the appeal of the region’s assets.

The European Central Bank will accept Greece’s government bonds as collateral in its refinancing operations as long as the country’s consolidation program stays on track, Ewald Nowotny, an ECB Governing Council member, told reporters today. Officials said last week it may not be able to take Greek sovereign debt as collateral if bond maturities are extended.
“With the authorities still seemingly divided over how to proceed with the debt crisis, there remain considerable short-term risks for the euro,” Derek Halpenny at Bank of Tokyo-Mitsubishi UFJ Ltd. wrote today.

Australia’s dollar was among the worst performers against the greenback after a Chinese manufacturing gauge fell to a 10-month low amid concern the global economic recovery will falter.
The preliminary purchasing managers’ index for China compiled by HSBC Holdings Plc and Markit Economics fell to 51.1 in May. It was 51.8 in April.
China is the nation’s biggest trading partner.
“A softening in Chinese manufacturing PMI overnight has been enough to revive fears that the pace of growth may be decelerating", Jane Foley, a senior currency strategist at Rabobank International wrote today. “The franc and the yen have inevitably benefited from it.”

Weakness among stocks continues to bolster buying interest among Treasuries, although the bounce by Treasuries hasn't been anything dramatic. More specifically, the benchmark 10-year Note is up about a dozen ticks. Still, that's enough to take the yield on the Note back toward its 2011 low.

GBP/USD draggs down and triggered bids on $1.6100, slipping to the lows around $1.6085. Later rate recovered to the figure. Further bids at $1.6050.

Europe's major bourses are now closed for the day. Losses were steep - Britain's FTSE fell to a 1.6% loss; Germany's DAX dropped 1.8%; France's CAC closed 1.8% lower; Spain's IBEX sank 1.4%, and Portugal's PSI gave up 0.4%. Weakness in Europe was largely owed to disappointing data in the latest round of PMI Manufacturing readings. Fiscal concerns also continue to weigh on sentiment there.
As a result, stocks on Wall Street weaken too with losses of more than 1%.

AUD/USD holds a bit higher session lows - at $1.0495. Stops in place under that earlier low, with more sub $1.0450. rate trade much lower Asian high on $1.0650.

USD/CAD holds C$0.9801 area amid light flows after printing a session high on C$0.9810. Financial markets in Canada are closed in observance of Victoria Day holiday. Flows modest. Stops in place atop C$0.9820.

EUR/USD $1.4000, $1.3900, $1.4130
USD/JPY Y81.00, Y81.50, Y81.60, Y81.95, Y82.00
GBP/USD $1.6050, $1.6100, $1.6200
USD/CHF Chf0.8865
AUD/USD $1.0500, $1.0600
NZD/USD $0.7930
AUD/NZD NZ$1.3375

Before the bell the S&P futures declined (-1.0%) to 1314.75. July WTI crude oil futures are at $97.60 per barrel (-2.50%).Gold prices are at $1508.90 per troy ounce (-0.1%).
 
Today the focus will be on the following factors:

- concerns about the Europe’s debt crisis intensified. Rating agency Standard & Poor's cuts Italy's credit worthiness to negative, thereby pointing the possibility of its lowering. The concerns were also intensified as Spain's centre-right opposition Popular Party took the lead in Sunday's local elections. The ruling Spanish Socialist Workers Party suffered its worst defeat in more than 30 years; 

- Iceland's airspace temporarily closed down early Sunday because of a violent Grimsvötn volcano eruption. This may put pressure on shares of airlines. Before the bell shares of the world's largest airline United Continental Holdings Inc. (UAL) dropped 3.2 percent. Today the market’s focus also will be on shares of DAL and AMR;

- today major macroeconomic statistics are not expected, that may have a negative impact on trade;

- the world's major stock indexes are traded or have already closed the session by significant lower: the Nikkei -1.5%, the Hang Seng -2.1%, the Shanghai Composite -2.9%, the FTSE -1.7%, the CAC -1.8%, the DAX -1.8%.

Corporate news:

- Japanese consumer electronics giant Sony Corp. (SNE) is expecting an annual loss of $3.2 billion for the fiscal year ended March. Before the earthquake the company expected a profit of $0.9 billion. The company approved operating profit of $2.44 billion. Its annual report is scheduled to come on May 26;

- AM Krispy Kreme Doughnuts’ (KKD) shares climbed by 1.1 percent as the company's profit for the last quarter surpassed analysts' forecasts ($0.13 per share vs. expected $0.09). The company's revenue grew by 13.6 percent to $104.6 million, that higher than expected.

Currently the initial support for the S&P futures is near 1310.00 area (session low).  The immediate resistance is at1325 area (session high).

U.S. stocks were headed for an early sell-off Monday, taking cues from world markets, which tumbled after rating agencies downgraded Greece and Italy late last week.
On Friday, rating agency Fitch cut Greece's credit rating by three notches to "highly speculative," putting it in junk bond territory. In addition, Standard & Poor's slashed Italy's outlook to 'negative' from 'stable.' These downgrades, combined with a weaker-than-expected reading on manufacturing in Europe released Monday, renewed concerns about the eurozone's debt crisis.
Furthermore, Spain's socialist ruling party was hit with the worst election defeat in years over the weekend, as citizens continued to protest the weak economy and high unemployment.
Companies: Shares of entertainment products maker Sony (SNE) slipped nearly 3% in premarket trading. The company posted a $3.19 billion annual loss and cut its full-year earnings outlook, to reflect damages of the earthquake and tsunami in Japan.
Shares of Krispy Kreme (KKD) jumped more than 9% in premarket trading, after the doughnut maker beat earnings per share by 4 cents on strong sales.
World markets:

Oil for July delivery fell $2.50, or more than 2%, to $97.60 a barrel.
Gold futures for July delivery slipped 90 cents to $1,508.50 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury jumped, pushing the yield down to 3.11% Monday from 3.15% late Friday.

July WTI Nymex crude slips back to $97.50 after rally off the lows of $97.10 fizzled out at $98.00. Support is currently seen at $96.75 ahead of $95.50.

Longs after the last $1.4000 dip proove themself as rate extends correction to retest the early Europe recovery highs of $1.4030/35. Above here and rate can edge on toward $1.4050 ahead of $1.4080. If rate remains below seen turning attention back on the $1.4000 area.

The euro slumped to a record low against the Swiss franc amid deepening concern Europe’s sovereign-debt crisis will worsen, reducing the appeal of holding the region’s assets.
S&P last week cut Italy’s credit-rating outlook to negative from stable, citing slowing economic growth and “diminished” prospects for a reduction of government debt. Fitch Ratings on May 20 lowered Greece’s long-term debt ranking to B+, four notches below investment grade, and said a voluntary extension of the nation’s bond maturities would be “a default event.”
“There’s a risk-aversive mood in the market, spurred by uncertainty about the European debt crisis,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “Concerns about a slowdown in the global economic recovery are also leading selling of the Aussie and kiwi.”
The yen gained versus all but two of its 16 most-traded peers. Spain’s Socialist party suffered its worst electoral defeat in more than 30 years and Standard & Poor’s on May 20 said it may lower Italy’s credit rating. The Dollar Index climbed to a nine-week high as a Chinese manufacturing index fell to its lowest level in 10 months, boosting demand for the American currency as a haven amid concern the global economic recovery will sputter.
The British pound climbed against the euro as Bank of England Chief Economist Spencer Dale said that monetary policy makers should boost interest rates even if Britain’s economic recovery isn’t yet guaranteed.
“I’m not at all confident that the recovery has taken hold and will definitely power away,” Dale said in an interview with the Financial Times published May 21 in London. “However, I’m even more worried about what’s going on in terms of inflation.”

EUR/USD
Offers: $1.4020, $1.4030/35, $1.4045/50, $1.4080
Bids: $1.3970/65, $1.3955/50, $1.3915/00, $1.3870/60

USD/JPY
Offers: Y81.95/00, Y82.25, Y82.40/50
Bids: Y80.95, Y80.65/60, Y80.00

• let's wait on troika report on Greece;
  
• important that adjustment programs not be weakened;
  
• view that there's an easy way out is dangerous;
  
• No need to discuss collateral if Greece plan on track.

Picking up well after earlier lows of Y81.31 with the pair back to mid range on the day around Y81.72. Offers are now seen ahead of Y82.00 with stops set on a break of Y82.10 ahead of offers Y82.20/25.

Nikkei -0.52% 9460.63

The euro touched a record low against the Swiss franc as concern over Europe’s sovereign debt crisis deepened, reducing the appeal of the region’s assets.

The 17-nation currency reached the lowest in a week against the dollar after Spain’s Socialist party suffered its worst electoral defeat in more than 30 years and Standard & Poor’s on May 20 said it may lower Italy’s credit rating. 

The Dollar Index climbed to its highest in almost seven weeks as declines in Asian stocks spurred demand for safer assets.

Gains in the U.S. currency may be limited before reports this week that may show orders for durable goods declined and consumer spending cooled, providing more evidence that the world’s largest economy is losing momentum.

EUR/USD: the pair decreased in around $1.4060.

GBP/USD: the pair decreased in around $1.6200.

USD/JPY: the pair become stronger in around Y82.00. 

Monday morning sees the release of the flas manufacturing and services PMI releases for the main European states, including Germany, which is expected to see the data comes in at 61.0 and 57.0 and France at 57.0 and 62.1 respectively. The data leads up to the EMU data itself, which is expected to come in at 57.5 and 56.5 with the composite number coming in at 57.3.