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Daily Market Report 06/02/2012

European Shares
Bad news began to poor out of Greece on Friday amid reports that all three parties of the Greek ruling coalition have rejected deeper austerity measures required to receive the next tranche of funding due on March, laying the groundwork for a Greek default. The surprisingly strong US labour market data boosted confidence in the recovery of the world’s largest economy lifting global markets up. After European stocks hit a six month high on Friday, the gains are slowly being eaten away this morning, with the FTSE 100 trading down at 5862. The UK blue chip index broke above 5900 on Friday but didn’t manage to maintain the traction. Unsurprisingly the Euro zone crisis is expected to be the primary driver for the markets this week with Greek leaders needing to respond to Troika and international creditors today on the country’s austerity and structural reforms.
FX
The Euro has struggled to break the psychologically important 1.3200 level against the US Dollar, that was key support in mid-December, with the EUR/USD failing to post consecutive closes above 1.3200 ever since. After suffering substantial losses on Friday on the back of a stronger US dollar the euro’s downward trend looks to be continuing. At 1.3059 this morning key support level to watch sits at 1.2938. An upside penetration of 1.3200 could call for a rebound towards 1.3350.

Commodities
Gold rebounded in early trade after surprisingly strong US job data dragged the price of the precious metal down by nearly 2% on Friday. Another round of QE in the US is rather unlikely but the long term low interest rate outlook could be supportive of gold. At 1730 this morning key levels to watch are 1670 to the downside and 1790 to the upside. As with gold, oil fell victim to the bears this morning with Brent crude slipping below $114 at the time of writing, weighed down by a stronger dollar and the worries over Greece. However the losses were limited by mounting tension between Iran and the West.
Today’s Calendar
On the economic data front things are a little quiet today with the due for release of German manufacturers’ orders at 11.00 GMT. The most important scheduled event for the sterling during the first full week of February is the BoE announcement on Thursday. The British pound could come under heavy pressure, should the Bank of England take additional steps to stimulate the ailing UK economy. On the same day the ECB is announcing its rate decision.

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