European officials continued to apply pressure on the Greek government yesterday to deliver legislated austerity cuts whilst still insisting that default is not an option. Both Merkel and Sarkozy have said that Greece will not be allowed to fail so we wonder if the Greeks really care what anybody is demanding? However, the markets were unsettled by the cancellation of a meeting between finance ministers due to-day in Brussels and they will instead hold a teleconference to discuss the Greek situation as Luxembourg PM Juncker said that he was not convinced that the leaders of the Greek coalition parties were committed to the austerity program. The next meeting is now scheduled for February 20 and for the first time the possibility of an exit of Greece from the eurozone has entered the mainstream political debate. The EUR fell yesterday to as low as 1.3080. It wasn't all bad news for Europe as Italy successfully sold EUR 6 billion of bonds at lower costs as investors largely ignored a downgrade of the country's credit rating by Moody's. However, there is no a storm brewing on another front that cause chaos in financial markets. The rising wave of assassinations and retaliations between Israel and Iran is threatening to escalate to a flash point and plunge the nations into a disastrous military conflict. Israel is upping the ante in relation to its protests against Iran's nuclear programme and has not ruled out the possibility of a military strike. At the same time, threat assessments from US intelligence sources indicate that Iran is now more willing to conduct attacks against US interests. USDJPY rose strongly yesterday after the BoJ increased its asset purchase fund from JPY 55 trillion to JPY 65 trillion. The Australian dollar fell to as low as 1.0628 yesterday. Equity markets closed yesterday lower as the Greek tragedy dragged on and US economic data disappointed. In Asia, stocks were mixed while European bourses fell with the DAX losing 0.15% to 6,728 while the FSTE lost 0.10% to 5,899. The S&P 500 has closed 0.09% low-er at 1,350 with commodity and financial shares leading the falls in the indexes 10 groups. US retail sales figures only rose 0.4% against me-dian expectations of a 0.8% and investors are beginning to worry about the so far one way traffic in equity prices this year. Commodity prices eased only slightly yesterday despite increasing worries over Greece and tensions rising in the Middle East. The CRB index closed 0.11 points lower at 313.95. WTI crude has held onto gains to close flat for the session at $100.90. Precious metals continue to ease with gold lower by 0.41% to $1,718 while silver has lost 0.85% to $33.40 . Soft commodities were mixed with cocoa rising more than 3% while coffee lost almost 4%. Copper is down 0.86%.

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