Risk sentiment had initially been given a boost yesterday after low demand for the ECB’s 3-month tender indicating European banks are not in dire straits for liquidity. However, a disappointing ADP employment report revived concerns of a double-dip in the US economy. Sentiment was beaten down further when Moody’s placed Spain’s debt rating on review for a possible downgrade.
A very heavy docket was eyed going into Asia but there was little good news to be garnered. The most anticipated release was Chinese PMI which disappointed to the downside confirming that growth is indeed slowing. Elsewhere, Australian manufacturing growth slowed for a second straight month, retail sales and consumer spending came in as expected but were extremely lackluster amid rising mortgage costs. In New Zealand commodity export prices fell for the first time in a year. A ray of light came out of Japan where the Q2 Tankan came out impressively strong, with sentiment not only improving but turning positive for the first time in two-years.
Worries over Chinese growth
and in turn the overall global economic recovery continue to dominate in the markets and has seen safe haven currencies
continue to push higher, in particular the Swiss franc
which set fresh record lows against the euro
. The euro
has held up remarkably well in such risk averse conditions after European funding concerns were soothed yesterday.
Elsewhere, the Aussie
could get some temporary relief on a report that PM Gillard
and Australia’s big three miners
have made significant progress in talks about a compromise regarding the mining tax and are on the brink of an agreement. Meanwhile, Fitch
was out saying the European debt crisis and market volatility have increased the risks of a recession.
Looking ahead, German retail sales (0.4% expected) gets the session underway at 06:00GMT followed by the RBA commodity price index (0.5% expected) at 06:30GMT. The focus then turns to PMIs with Swiss PMI (65.7 expected) at 07:30GMT followed by German PMI (58.1 expected) at 07:55GMT, Euro-zone PMI at 08:00 and finally UK PMI at 08:30GMT capping data for the session. US equity futures are pointing lower, commodities are softer with crude shedding over 1%.