The established resistance for EURUSD is at 1.3100

by Ong Yi Ling, Ker Chung Yang

Market Commentary

Key Notes: Despite publishing better data in its manufacturing and consumer confidence figures, investors shrugged off the positive news and focus on the lingering worries in the Euro-zone crisis. As such, S&P500 pared yesterday and that was contrary to our anticipation. For the day ahead, we will be looking at a couple of important events that will likely have an impact on the markets. Portugal will be selling 500 million Euros worth of debt today and markets will be eyeing the outcome of the auction to determine the ability of "PIIGS" nations to finance its debts. Secondly, we see US releasing manufacturing PMI and construction spending figures. Should these numbers turn out negative as economists have estimated, it could put some downside pressure on the markets. We anticipate that the bearish sentiments might cause the index to pare further, with established support at 1,170.

On currencies, Euro weakened against the Dollar and this was as per our initial anticipations. For the day ahead, the ultimate performance of Euro hinges on the upcoming debt auction by Portugal. While markets are bearish on the Euro, we see some possibility of Euro enjoying a relief rally should Portugal raise the debt successfully. The established resistance for EURUSD is at 1.3100.

Market Summary

• US: US stocks declined amidst concerns that Europe's government debt crisis will worsen and as Google will likely face an antitrust probe. Google fell 4.5% after EU antitrust regulators began an investigation. EBay dropped 3.6% after being downgraded by Piper Jaffray. BOA slumped 3.2% as the cost to insure its debt against default climbed to a 16-month high. The S&P 500 received another round of beating as Obama said he asked Treasury Secretary Timothy Geithner and budget office director Jack Lew to lead negotiations with congressional Republicans on extending Bush-era tax cuts.
• Europe: Most European stocks declined as the region's debt crisis intensified. BNP Paribas led bank stocks lower as Italian and Spanish government bonds slumped. Nestle lost 2.2% as Credit Suisse cut its rating on the shares for the first time in almost six years. Italian and Spanish government bonds fell, driving the extra yield investors demand to hold the securities instead of German bunds higher.
• Asia: Asian stock markets ended lower on Tuesday as concerns about further tightening measures in China weighed on china-related shares while Japanese equities were also hit by caution over European sovereign debt. Regional sentiment was hurt by continuing worries over the euro-zone debt woes. Despite Sunday's announcement of a EUR85 billion bailout package for Ireland, worries remained as to whether Portugal or Spain will also need help refinancing their debt. China's shares slid for the third straight session, on concerns about further monetary tightening measures after officials continued to stress on the need to curb inflation.
• Singapore: The STI pared 0.43% to close lower at 3,144.70. Volume was at 1.35 billion shares worth $2.27 billion. Losers led gainers 304 to 172.
• Currencies: The Euro traded near an 11-week low against the Dollar on concerns that other European nations will struggle to raise funds amidst the region's debt crisis. As such, market participants are speculating that ECB will likely keep benchmark rates unchanged. The Dollar traded near a two-month high against the Yen on speculations that US will release rosier labour data on Friday.

Key events/data to look out for:

• US: ISM Manufacturing PMI, Fed Beige Book, Initial Claims, Unemployment Rates, Non-Farm Payrolls, ISM N-Manufacturing PMI.
• UK: Manufacturing PMI.
• Eurozone: Ger Retail Sales, Ger Manufacturing PMI, ECB Rate Decision, EZ Retail Sales.
• China: HSBC PMI