Asia Pacific markets were weaker after a US equity bourses saw sharp declines, with the S&P 500 index falling by 3.1%, and the Nasdaq closing at its lowest level since October, shedding nearly 3.9%. The market rout was triggered by mounting concerns regarding health of the European banking sector, and the strength of the global economic recovery. Disappointing consumer confidence figures from the US marked a 3-month low, with a reading of 52.9, down from 63.3 a month earlier. The Nekkei 225 saw the largest decline, falling nearly 2%, while the S&P/ASX 200 index and the Shanghai SE composite were lower by 1% and 1.2% respectively . Commodities pared some of yesterday's losses, with crude oil climbing back above $76 per barrel, after falling as low as $75.21 per barrel. Gold stabilized, after risk-off trades bolstered demand for the precious metal, which currently holds just beneath the $1245 mark. The yen eased off record highs against the swissy, and an 8 1/2 year highs versus the euro, while the dollar index dipped below the 86 handle, as risk aversion trades subside.
ECB Offers 3-Month Tender
The negative momentum from Asia did not carry into European markets however, with equity bourses posting early gains on news that the region's banks had asked the ECB for 131.9 billion euros in 3-month loans, far lower than previously forecasted. The loans come on the eve of the expiration of a key ECB refinancing program that was implemented a year ago to provide liquidity for struggling banks. EU banks will be required to repay more than 440 billion euros that were borrowed at low rates at the height of the financial crisis. Lower than expected demand eased concerns regarding bank liquidity, and provided a boost to equity markets, with most indices higher by 1%-2%, early in London trade.
Euro Rallies
The euro pared losses that saw the single currency trigger our limit at 1.2150 yesterday. News of the ECB's tender was well received by markets, and provided support for the battered euro, which surged past the 1.2260 resistance level just minutes after the announcement. Interim resistance is eyed at the 61.8% Fibonacci extension taken from the May 21st and June 21st crests, at the 1.23 handle, with subsequent ceilings seen at 1.2350 and 1.24. Upward momentum strengthens with a breach above 1.2450. Support starts at the 1.22 figure, with stronger demand eyed lower at 1.2150 and 1.2080. Longer-term target are eyed below the 1.20 handle at 1.1980.
Today's economic diary sees the first of this week's employment data, with the ADP employment report due out at 8:15am in New York. Consensus estimates call for a gain of 60k jobs. Soon after, Canada releases GDP figures, with the April reading expected to fall to 0.2% from 0.4% the previous month. At 9:45am, the Chicago purchasing manager index is called lower by .7 to 59.0. On the agenda tomorrow, Japan reports on the Tankan surveys, and Germany releases retail sales and PMI figures. The US is expected to show a marginal easing in initial and continuing jobless claims, and ISM manufacturing. An update on the housing market follows, with pending home sales and construction spending seen moderately lower, accelerated by the expiration of the new buyers tax credit. Traders will be eagerly awaiting Friday's non-farm payroll report, as concerns about the health of the US recovery come into question. Payrolls are expected to fall by 115k in June, marking its lowest level since December. European markets have held gains, with US equity futures pointing to a stronger open, early in London trade.
