New nervousness in global markets

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The Euro recovered somewhat in early Asian trade this morning trading at 1.2928 against the US dollar.  This after the stock markets and the Euro slipped on Monday as investors looked past recently announced central bank stimulus to focus on economic fundamentals.

German business sentiment was weaker and Spain dragged its feet on asking for an international bailout causing a high ranking German official to ask Spain to make up its mind. Germany and France quarreled on when to implement a EU banking union, and in the US Caterpillar, the world largest maker of earth moving equipment, warned of slower demand for its products due to fears of weaker commodity prices. All factors contributing to a more negative market sentiment.

Japanese Yen which has surged over the last days gave up some ground against both dollar and Euro, trading at 77.77 against the USD. German business sentiment dropped to its lowest level since early 2010 created concerns about a slowdown in the euro zones largest economy. Spain remained in focus. Its government yield rose on concerns that the Rioja government is postponing a request for an international bailout. Greece is still a concern after a report indicates that its budget deficit is bigger than previously thought.

Oil prices recovered from yesterday lows. Brent crude is trading above USD 110 a barrel on renewed fears for a major conflict in the Middle East. After the Israeli Prime Minister, Benjamin Netanyahu, has been bellicose for weeks, the head of the Iranian revolutionary guard stated that Iran was ready for an attack and would hit back. In an interview with CNN yesterday night, the Iranian President, Ahmadinejad, took a more conciliatory tone before his speech the UN General Assembly tomorrow.  Gold prices has strengthened trading at 1765 which is still far below it Friday peak on 1787.

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