Australia: With a lack of local information released during yesterday’s trading session, we saw the AUD steadily fall during the session, taking the lead from our local equity markets. The ASX200 and the All Ordinaries were down almost 2%, as some weaker than expected Chinese manufacturing data continued the recent tread of disappointing results in this area. The data printed at a 10month low of 51.1 in May which was down from 51.8 in April. This result fuelled investor concerns that global growth is slowing down after the US and Germany only last week also posted disappointing PMI results. This weaker tone continued through to the offshore session which saw US equities fall 1.2% and European equity markets down 2.1%.

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The concerns out of Europe also fuelled the AUD fall as the weaker EUR dragged down our local currency. With a lack of local information due to be released in the coming days; Thursday will see the release of capital expenditure data; it is likely that the AUD will continue to track the equity markets, and developments out of Europe. There certainly feels as though there is further scope for the AUD to fall should the AUD fall below the strong support levels of USD1.0475.
Majors: Europe was again the main news story last night, as their sovereign debt concerns intensified with another ratings downgrade was made, and a ‘watch’ was placed on another Euro-zone country. Belgium had its outlook cut to ‘negative’, from ‘stable’ by Fitch Ratings as the country continues to run without a government due to political differences. This pushed the EUR/USD below the psychological mark of USD1.4000 for the first time in two months, with investors already on edge after the negative watch put in Italy over the weekend.

While Belgium isn’t an influential country with regards to the Euro-zone, and doesn’t pose a huge threat to the stability of the region, it just shows how sensitive the market is at the moment when any news regarding debt problems in Europe is
mentioned.

Overnight Greece announced some planned asset sales for 2011 and 2012 in an attempt to reduce the amount of debt to be repaid. The current level of debt in Greece sitting at EUR328.6bio (142.8% of GDP), the proposed asset sales will only reduce the debt by 3.5%.
Economic Calendar

GE GDP 1Q
US New Home Sales
US Richmond Fed Manufacturing Index
US Fed Bullard & Hoening speaks

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