Australia: Although the meetings between the Euro-finance ministers are an attempt to appease the markets regarding the sovereign debt issues in the region, it seemed that it just fuelled concern that the problems will spread further to the ‘core’ of Europe. This caused equity markets to fall sharply, not only in Europe, but the US as well.

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The DOW was down 1.2% and the S&P500 down 1.8%; the worst fall in almost a month. The start of the reporting season in the US saw Alcoa announce larger than expected profits; but the market won’t be able to digest this result until tonight’s trading session as it was posted after markets close. In our local market today we have the release of the NAB business confidence and conditions.

Recent results have shown that businesses are still struggling, and today’s result isn’t expected to be any different. Despite the RBA continuing to hold off increasing interest rates, businesses are finding it hard to gain any ground with the concerns over the global economic recovery weighing on sentiment.

Majors: The EUR has fallen to a seven week low against the USD as concerns regarding Italy & Spain’s debt position comes to the forefront of news. The new leader of the Spanish region of Castilla La Mancha has said that the budget deficit is twice as large as had previously been thought.

This as well as rumours that the European Central Bank are seeing to increase the EUR1.5bio to cover Italy’s debt problems spooked the markets and saw the EUR/USD tumble below USD1.4000.

Reports from the finance ministers meeting overnight also indicated the possibility that Greece may default; with the ministers indicating that they may look to private creditors to contribute to a new aid package for the country as the French-led debt restructure plan may collapse.

Debt concerns are also coming out of the US, as the Congressional leaders are still debating how to solve the debt impasse prior to August 2. It seems that no one can agree on the split between taxation and entitlements.

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