Tuesday Morning Financial Market Update

By FX Empire Analyst - Barry Norman
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Europe's leading shares fell yesterday; dragged down by weakness in banks, as the European Central Bank and Germany's finance ministry deflated optimism the ECB would cap peripheral bond yields in an effort to contain the euro zone's debt crisis. U.S. Stocks eased off their worst levels to end mostly flat in another thin session Monday, but still remained around four-year highs, lifted by gains in techs.

Asian stocks were off to a flat start on Tuesday as investors await further clues about any action from the ECB to ease the region's fiscal crisis.

Spain’s 10-year bonds advanced for the first week this month on speculation the government will request a sovereign bailout that would trigger European Central Bank purchases of its debt.

German 10-year bunds dropped as Chancellor Angela Merkel signaled support for the ECB’s plan to help reduce indebted countries’ borrowing costs and attach conditions to the providing the support. Spanish Prime Minister Mariano Rajoy reiterated that he is considering requesting purchases.

Asian stocks rose this week, with the benchmark index posting its longest weekly winning streak since March, after China’s Premier Wen Jiabao said there’s more room to adjust monetary policy and U.S. economic reports signaled strength in the world’s largest economy.

China’s July housing data showed prices of new homes rose in the largest number of cities in 14 months, as sentiment improved after interest rate cuts and incentives for first-time buyers.

The euro remained higher before Luxembourg Prime Minister Jean-Claude Juncker visits Greece to discuss the country’s request for an extension to its fiscal adjustment program

Gold rose by 0.13% after the ECB president said policy makers will do whatever is needed to preserve the euro and amid increasing expectations of further stimulus measures in the US. But market concerns remain. Some physical “buying” of gold from Europe this week spiked the bullion price, while the amounts have been “quite small” so far. Silver rose by 0.02%.

Crude oil rose by 0.02% for the first time in three days in New York on concern eased that rising economic worries faltering demand of oil will be  a concern in the world’s biggest crude consumer.  Brent crude squeezed margins and has begun stifling demand from petrochemical makers.

Reports that Saudi Arabia is producing oil at its highest capacity in three decades were released yesterday.

European governments are rushing to boost stockpiles of crude oil and fuel, three agencies in control of strategic reserves said on Friday, anxious to comply with new EU rules and ahead of feared supply disruptions in the Middle East.

Crude oil prices slipped just under $96 per barrel, in choppy trading as investors remain worried about the European Central Bank's ability to address the euro zone debt crisis while tight North Sea supplies and Middle East turmoil limited losses.

Natural gas futures closed higher, after three straight losing sessions. Prices were supported by concerns about rising tropical activity and some technical buying.

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