China´s manufacturing index hit a 10-month low in May according to a ´´flash´´ estimate by HSBC. But price pressures eased with input prices at a 9-month low.

European shares hit five-week lows on Monday. Investors responded to the downgrading of Greek debt by Fitch Ratings and Saturday´s move by Standard and Poor´s to cut the rating outlook for Italy from ´´stable´´ to ´´negative´´. In addition there was concern that ash spewing from Iceland´s Grimsvotn volcano could disrupt air traffic again. The FTSEurofirst index fell by 1.7pct while the German Dax lost 2.0pct and the UK FTSE dropped by 1.9pct.

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US sharemarkets hit the lowest levels in a month on Monday as investors trimmed positions in equities in response to the on-going European debt crisis. But one stock to buck the trend was Krispy Kreme, up by 25.8pct as it reported its highest quarterly profit in more than seven years. The Dow Jones fell by 130pts or 1.1pct with the S&P 500 down 1.2pct and the Nasdaq lost 44pts or 1.6pct.

US longer-term treasuries rose on Monday (yields lower) as investors shifted from stocks to bonds. But short-term treasuries didn´t get the same boost as investors awaited issues of new notes later in the week. Treasury will sell $35 billion in two-year and five-year notes on Tuesday and Wednesday and will sell $29 billion of seven-year notes on Thursday. US 2yr yields actually rose by 1pt to 0.527pct but US 10yr yields fell by 2pts to 3.129pct.

The US dollar rose against major currencies as the Euro debt crisis prompted investors to move to ´´safe-haven´´ currencies. The Euro fell from highs near US$1.4070 to US$1.3970, ending US trade near US$1.4045. The Aussie dollar eased from highs near US105.60c to US104.75c before ending US trade near US105.00c. And the Japanese yen eased from 81.30 yen per US dollar to end US trade around the day´s weakest levels of JPY82.00.

US crude oil prices fell by 2.4pct as investors fretted that the Euro debt crisis could derail the global economic recovery. A stronger US dollar also weighed on commodity prices. In addition, data showed China´s manufacturing sector growing at the slowest pace in 10 months. The Nymex crude oil contract fell by US$2.40 or 2.4pct to US$97.70 a barrel and London Brent crude fell by US$2.29 to US$110.10 a barrel.

Base metal prices slumped on the London Metal Exchange on Monday in response to the Euro debt crisis. Metals fell between 1.1-4.9pct with nickel faring worst. But the gold price rose to two-week highs on Monday in response to Euro debt woes, with Comex gold futures up by US$6.50 an ounce to US$1,515.40.

Ahead: In Australia alcohol consumption figures are released. In the US new home sales and the Richmond Fed index are released.

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