Standard & Poor's downgraded Greece's long term-credit rating from B to BB-minus, citing that it saw an increased risk that Greece will need to restructure its debt. S&P said its projections suggested that a 50pct reduction in principal debt could be needed to restore Greece's debt burden to a sustainable level.

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European shares fell on Monday following the S&P downgrade of Greek sovereign debt further into junk territory. Banking stocks were hit hard, with the STOXX Europe 600 banking index down 1.2pct. Other highly indebted peripheral euro zone countries - which may struggle to finance their debts - were also weaker with Spain's IBEX losing 1.9pct and Italy's FTSE MIB down 1.3pct. The FTSEurofirst index fell 0.4pct while the German Dax lost 1.1pct and the UK FTSE fell 0.6pct.

US sharemarkets rallied on Monday. Mining and energy stocks were in demand following the sharp gains in commodity prices. The CRB futures index - a global benchmark for commodity prices rose by 2pct, marking the biggest one day gain in eight weeks. The S&P energy index rose 1.6pct. The CBOE volatility index also known as the "fear gauge" fell 6.7pct. The Dow Jones index rose by 46pts or 0.4pct with the S&P 500 higher by 0.5pct and the Nasdaq was up by 16pts or 0.6pct.

US treasury prices were steady on Monday as investors waited to gauge the demand for the $72 billion, worth of US government debt expected to be auctioned this week. US 2yr yields were steady at 0.549pct and US 10yr yields were steady at 3.155pct.

The US dollar rallied against the Euro on Monday as euro zone sovereign debt concerns resurfaced. The Euro fell from highs near US$1.4440 to US$1.4255, ending US trade near US$1.4350. The Aussie dollar rallied from lows near US107.10c to around US108.10c, before ending US trade near its high. And the Japanese yen rose from lows of 80.85 yen per US dollar to highs around JPY80.15, closing US trade near its highs.

US and European crude oil prices rose on Monday rebounding after the sharp sell-off last week. Supporting the bid for oil was a fire at Chevron's Pascagoula refinery and the flooding of the Mississippi River - which is near key US refineries. In addition TransCanada said its 591,000 barrels-a-day Keystone pipeline will remain closed for a few days after a leak was detected. The Nymex crude oil contract rose by US$5.37 or 5.5pct to US$102.55 a barrel. London Brent crude rose by US$6.77 to US$115.90 a barrel.

Base metal prices were mostly higher on the London Metal Exchange on Monday with the exception of Nickel. However gains were capped by the European debt problems. And the gold price managed to recover after recent losses. Comex gold futures rose by US$11.60 an ounce or 0.8pct to US$1,503.20.

Ahead: In Australia, Trade data, tourism data and the Federal budget are released today. In the US, factory orders and total vehicle sales are slated for release.

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