Monday, July 11, 2011

Market Morning Overview - July 11, 2011

Previous session overview

The euro fell against the dollar and yen on Monday in Asia due to worries over debt crisis contagion in Europe as investors speculate that senior European officials may accept a partial default of Greek debt later in the day.

The European unit was at USD1.4189 at 0450 GMT from USD1.4265 in New York on Friday. Dealers said it may fall to USD1.4000 later in the day. The euro was at JPY114.61 from JPY114.96. 

The dollar, meanwhile, was at JPY80.77 from JPY80.68 in New York and the ICE Dollar Index was at 75.431 from 75.110. 

The Pound was a major outperformer surging back above USD1.6000 with EURGBP selling helping the major rally and ignores risk aversion. June PPI was still high at 17% y/y vs. 16.1% previously. CHF and GBP stand to gain if the Euro and US debt problems persist.

The USDJPY rises as some Japanese importers are bidding for their account settlements.

Elsewhere, spot gold was at USD1547.00 per troy ounce, up USD6.30 from its New York settlement Friday. August Nymex crude oil futures were down 60 cents at USD95.60 per barrel.

Better demand for safe-haven currencies such as the yen and U.S. dollar hurt the Australian dollar in Asia trade Monday but analysts noted the local unit held up relatively well despite accelerating Chinese inflation, worries over Europe's and America's fiscal positions and Australia's introduction of a carbon tax. At 0603 GMT, the Australian dollar was at USD1.0717 down from USD1.0781 late Friday. Against the Japanese yen, the Australian dollar was at JPY86.55 down from JPY87.64.

Market expectation

All eyes are on an emergency meeting of top European leaders called by European Council President Herman Van Rompuy for later in the global day following a Financial Times report on Sunday suggesting that the officials may allow Athens to default on some of its bonds.

If the speculation turns out to be correct, concern will intensify that debt problems in Europe will get more severe and spread to other nations such as Italy, traders said.

Analysts said the greenback will start falling and it may reach JPY80.00 in the near term as last week's disappointing U.S. non-farm payrolls data came as a big negative surprise, some dealers noted.

The view among investors that the world's largest economy may exit its soft-patch soon has diminished and it's possible that investors will again start talking about another quantitative easing program by the U.S. Federal Reserve, analysts said. 

European stock markets are expected to ease at the open Monday, with grim U.S. payrolls data Friday, higher than expected inflation data from China over the weekend and continued worries over the euro-zone debt crisis all combining to weigh on market sentiment.