• 140 reported killed, hundreds injured in unrest in China’s Xinjiang – X inhua
  • Russia, U.S agree text of outline deal on cutting nuclear weapons – IFAX quotes source at Russian Foreign Ministry
  • Markit German construction index falls to 41.0 in June from 44.8 in May
  • World bank President Zoellick says protectionist trends could easily spin out of control. 2009 remains dangerous year, pace of 2010 recovery far from certain
  • UK new car registrations fall -15.7% y/y in June, smallest fall since July 2008
  • Euro zone sentix index falls to -31.3 in July from -27 in June, much weaker than median forecast of -25.0
  • ECB’s Nowotny: See stabilising economic situation in parts of emerging Europe. No substantial risk for EU member states in Eastern Europe
  • Recession may get worse, Gordon Brown warns world leaders

There has been a marked rise in risk aversion and its benefitting the JPY, and to a slightly lesser degree, the U.S. dollar. USD/JPY is down at 95.20 from a European opening around 95.55, while EUR/JPY is down at 132.30 from around 133.65.

Stocks, oil etc are taking it on the chin, as worries grow that the markets have been overly optimistic in their hopes for an early economic rebound. The release of very poor US jobs data last week continues to weigh on the market. There is also alot of caution evident ahead of the Q-2 earning reports, which are due to start flowing this week. The civil unrest in China will hardly have helped matters.

EUR/USD is down at 1.3900 from early 1.3980. Talk of sovereign buy interest in the 1.3900/20 area has helped slow the sell-off, but it hasn’t arrested it. And it should be noted, that so far I, haven’t been able to get confirmation of any actual sovereign buying. If it were of any perceptible size you’d have expected a respectible rally, which we haven’t seen.

Cable has had a bad morning, down best part of two big figures at 1.6110. The sell-off accelerated once 1.6200 (the base of perceived 1.62/1.66 trading range) gave out and decent-sized stops were triggered.

Sterling has been weak in it’s own right, EUR/GBP up at .8625 from an early .8580. Sources note decent-sized buy orders lined up down in .8520/50 area. Sterling will not be helped by speculation the Bank of England is preparing to ratchet up their QE programme by a further £25 bln later this week.

USD/JPY lower as aforementioned. Much talk of 95.00 option interest, and defence of said level has so far stymied accelerated sell-off. Also talk of decent-sized buy orders down at 94.75/00.