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Greek poll news and talk of a European rescue fund for distressed banks are a couple of factors lending the single currency some support

Market View | Monday, May 28, 2012 4:03 AM GMT

Good morning ,

-Greek poll news and talk of a European rescue fund for distressed banks are a couple of factors lending the single currency some support. The US Dollar index is pulling back after setting a 17-month high as technical positioning across financial markets hints at a broad recovery in risk appetite.

-Over the weekend as many as 6 weekend Greece opinion polls show support for New Democracy (ND, pro-austerity) party at 25.6-27.7%; Syriza (anti-bailout) support at 20.1-26%. EUR/USD took this as positive news for June 17th elections and the possibility that Greece could stabilize. EUR/USD tested $1.2610 while AUD/USD gained in the session over 120 pips to $0.9870, USD was weaker against the Swissie, yen and NZ$ as well as a return for risk appetite returned to the markets.

-The euro could also get a short-term bounce after net-short contracts on the euro-dollar on the Chicago Mercantile Exchange hit a record high of 174,000. Some traders could use the data as a contrarian signal to buy.

- The Asian markets have risen on Monday amid hope for Greece ,  Australia’s S&P/ASX 200 and Hong Kong’s Hang Seng rose by 1% and 0.60%, respectively, while China’s Shanghai Composite got extra 0.30% in value. Japan’s Nikkei Stock Average gained 0.17% . Futures for the German DAX 30 and French CAC 40 are signaling a higher open by 1% and 1.15%, with a thin calendar ahead and many countries on holiday .

-Former Greece PM Papademos said the Government may not meet its obligations beyond late June assuming further installments of aid do not come from the EFSF and IMF

-Some tempers flared after IMF head Lagarde said to have made some controversial comments in UK press interview this weekend, stating: "As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time... And I think they should also help themselves collectively [by] paying their tax."

-Greece Pasok Leader Venizelos: Allegations by IMF head Lagarde that Greeks do not pay taxes are an insult. Greece Pasok Leader Venizelos reiterates proposal to soften Greece bailout terms; Says one year extension already received support from EU's Juncker.

-- Spanish press reported that Spain govt may request at least another €30B from EFSF to recapitalize its banking sector if risk premiums remain around 500bps above bunds. There was also a report that Spain was considering recapitalizing Bankia with funds raised from Spain govt bond funds in exchange for shares.

-Some Bank of Japan board members cautioned that the BOJ’s stimulus measure of increasing financial asset buying could lead to the public notion that it is financing government spending, the minutes of the bank’s April 27 policy meeting released Monday showed. At the  meeting, the BOJ’s policy board decided to expand
its financial asset-buying program to about Y70 trillion from Y65
trillion, as widely expected, by raising purchases of long-term Japanese
government bonds to Y29 trillion from Y19 trillion and reducing
six-month market operations.

-- China reported April industrial profits over the weekend with the third consecutive decline. China Industrial Bank chief economist Lu Zhengwei said "China's economy is slowing down, so profit growth will also be slower this year.

-New Zealand PM Key: Wants to expand bilateral relationships with Germany, the EU and NATO; Will meet with the BoE's King on trip to the UK

-US markets are closed for Memorial Day

Have a nice week !

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