Eyes on the E.U. Summit

Broad markets are doing their best to hold to yesterday’s gains, yet this task seams difficult ahead of an emergency summit for E.U. leaders and data fromChinasignaling that the manufacturing sector contracted further in July.

Markets hope that the E.U. leaders will be able to make progress in resolving the Greek debt crisis. Meanwhile news emerged thatFranceandGermanyreached an agreement overGreece’s debt crisis, spreading some optimism earlier today.

As investors will remain focused on the European debt crisis and worry from a possible contagion, especially toItalyandSpain, caution will persist, and the Forex market will continue to be swift the next two days.

Chinasaw contraction in July’s factory orders, indicating thatChina’s tightening measures to cool inflation may have started to put pressures on growth. This spread fears among the Asian investors, and demand for the safe heaven yen increased.

Adding to the downside pressures on sentiment was today’s disappointing PMI reports fromGermanyandFrance, and a worst than expected current account report fromEurope. The euro is trading with a downside bias around 1.4180.

The pound fell today although the retail sales witnessed a slight improvement in June, yet the public sector net borrowing was disappointing, while the storm in the nearby European continent is weighing on overall sentiment.

As the level of uncertainty remains unusually high, markets will be trading within limited ranges. Gold managed to climb back above the $1600.00 per ounce level as demand on safe heaven continues.

Meanwhile oil fell below the $97.50 level as the global economic outlook remains unclear. The U.S. will release later in the day the weekly jobless claims and the Philly manufacturing index, yet the attention will continue to be on politicians who are trying to reach a deal to raise the debt ceiling.