• The EUR fell and risk sentiment dived on reports that Belgium was seeking to renegotiate the Dexia bailout with France. I’m sure there will be more on this during the European session as the market will look for confirmation or denial from Belgian government sources.
  • The HSBC China flash PMI fell to 48.0 from 51.0 last month. Any number below 50 signifies an industry contraction.
  • Regional stockmarkets fell by almost 2% (Nikkei was closed for a Japanese public holiday)
  • Gold rose slightly to $1707/oz; Oil $96.50/bbl
  • Australian Q3 construction work was stronger than expected at +12.5% QoQ

The two major stories in Asia were firstly the Dexia reports and secondly the China flash PMI, both of which had a negative effect on risk sentiment.

EUR/USD closed in NY around 1.3520 but when news outlets started quoting a Belgian newspaper article, which suggested that Belgium wants to re-negotiate the Dexia bail-out, the EUR fell quite swiftly. The article doesn’t quote any sources and does in fact contain a denial from one Belgian source, but the market ran with it anyway. The session low was 1.3450 but bounces have been rather anaemic since the low, suggesting that early Europe might have another look and see what’s at 1.3420.

AUD/USD was the other main mover, obviously impacted by risk sentiment and the China data. It opened in Asia near .9850 and fell by over 100 pips before steadying. Initially stops were triggered below .9800 on the Dexia reports, and then fresh lows were posted near .9750 after the China PMI. Range: .9751/.9855

Cable lagged the EUR moves but followed its lead, trading 1.5598/1.5654.

USD/JPY was quiet with Tokyo closed, trading 76.90/77.04. USD/CHF range .9123/65.