Officials On Sunday Afternoon

The euro, oil and stocks fell on Tuesday as Greece's political crisis intensified after a call to form a new government renounced the terms of a bailout that is keeping the country's finances afloat. The results of weekend elections in Greece and France, in which voters soundly rejected harsh austerity measures seen by markets as a way out of the debt crisis, heightened the uncertainty of the path ahead for the euro zone. Alexis Tsipras, the leader of the Greece's Left Coalition party, began efforts to form a government by renouncing the EU/IMF bailout terms and threatening to nationalize banks. The head of a centrist conservative party, which won the most votes Sunday, said he would not back a minority government that rejected the bailout, making repeat elections in a few weeks ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) USD The euro suffered overnight as fears over the situation in Greece have resurfaced. While the market is hoping for a clinching of a debt swap deal today with private sector creditors, securing cross-party support for further austerity measures and securing further funding from the troika is proving far more difficult. According to political leaders in Athens, the main parties have until noon today (local time) to respond to the troika’s demands, and so far there appears some distance between where the national unity government lies and the IMF’s targets. Talks continued late into the evening on Sunday and will resume today between the troika and the local authorities. Reports suggest that the main point of contention lies in private sector ...

(Reuters) - The euro advanced to a six-week peak against the dollar on Monday, as investors grew confident European leaders will come up with a broad agreement to deal with the euro zone's debt crisis at a second summit scheduled for Wednesday. European leaders neared a deal over the weekend on bank recapitalization, and euro zone officials said France and Germany were close to agreement on how to use the European Financial Stability Facility to stave off contagion in the bond market. As the New York session began, the euro surrendered gains but reversed losses, expressing renewed optimism concrete steps to resolve the crisis will be announced on Wednesday despite serious divisions on the size of the haircut private holders of Greek bonds will have to endure. The U.S. dollar was shunned ...

(Reuters) - Oil tumbled in a second day of heavy losses on Monday, with Brent crude reaching its lowest price in almost a month as escalating fears over the euro zone debt crisis triggered across-the-board selling of riskier assets. After notching its biggest two-day drop since a steep slide in early August, Brent pared losses in post-settlement trade on news that Greece may be near an agreement with lenders to continue receiving bailout funds. Still, the growing possibility of a default hung heavy over markets all day after leaders failed to find new ways to resolve the crisis at the weekend. Oil has weathered much of the turmoil in financial markets over the past month thanks to supportive fundamentals, such as diminished North Sea production and healthy Chinese demand. After falling ...

(Reuters) - With time running short in U.S. debt talks, Republican and Democratic senators sought on Sunday to craft a plan that could avert an unprecedented government debt default while making modest cuts in the deficit. Aides to President Barack Obama said he still holds out hope for a "grand bargain" that would combine a deal for up to $4 trillion in deficit reduction with an agreement to raise the country's borrowing limit. But there were few signs of progress as the August 2 deadline to avoid a default drew dangerously close. Behind the scenes, Senate Republican leader Mitch McConnell and Senate Democratic leader Harry Reid were negotiating over a fallback plan proposed by McConnell that would allow Obama to raise the debt limit while sparing Republicans from having to vote in ...

The Week Ahead Highlights * Stress test results are in--Yawn * Sterling bolstered as some of the economic gloom lifts * German recovery becoming difficult to ignore * JPY-strength becoming an issue in Tokyo * Key data and events to watch next week Stress test results are in--Yawn The long-awaited results of the Eurozone banking sector stress tests were delivered on Friday and markets greeted them with a collective yawn. Earlier leaks led markets to conclude the adverse scenarios would not be especially stringent, causing most to discount the results. To re-cap, only 7 of the 91 banks tested failed, requiring a total of only EUR 3.5 bio to be raised in new capital. To put that number in perspective, some analysts reckon Spanish banks alone need to raise EUR 40 bio to ...

In today’s Asian session, risky assets again came under selling pressure as the weekend’s events failed to provide markets with any additional security. Friday saw a sharp USD appreciation as positive data continues to come out of the US, in contrast with the negativity coming from Europe. Hungary clumsily stepped into the sovereign default fray last week which helped precipitate a selloff in EURCHF just as the market’s high expectations for US NFP failed to live up to the hype. Officials from the new Hungarian government spent the weekend trying to repair damage from the reckless comments released last week regarding Hungary’s state finances. The state secretary attempted to reassure the markets that there was huge differences between them and Greece. We suspect the market’s reaction ...

Highlights * Event risk to dominate markets next week * Risk sentiment may falter further * GBP outlook depends on new government tackling the deficit * Greek woes will persist well past the weekend * Key data and events to watch next week Event risk to dominate markets next week The month of May looks set to start with an eventful week that may generate significant volatility. (N.B.: Monday is a bank holiday in London.) First up, on Sunday, the EU has scheduled a press conference at which the final details of the Greek aid package are expected to be announced. The market will be looking for a 3-year deal totaling EUR 120 bio, at the minimum, as being sufficient to prevent a Greek default or funding crisis. Anything less and markets may express profound ...