Equity markets in Asia were higher for the most part on the back of positive manufacturing data out of China during the month of December.  The gains were limited, however, as corporate earnings in the US were uninspiring and this weighed on risk sentiment during the session.  Another risk negative was the trade balance report out of South Korea, which showed that export figures dropped for the first time in more than 2 years (falling by a massive 6.6 percent).

In commodities markets, we saw the oil price start to stabilize and post some moderate gains after nearly a week of losses as analysts forecast lower demand levels globally.  Wheat prices were also higher by 1.4 percent on reports that cold fronts in Russia and the Ukraine will limit supply levels.  But the Purchasing Managers Index (PMI) report out of China was the main story, showing a rise to 50.5 for the month of December, barely managing to surpass the expansionary 50 level but was encouraging enough to reverse the impact of the day’s other negative stories.

The Euro was lower against most of its major counterparts overnight as end of the month order flows led to some position squaring in short-term long positions.  Adding to the downside pressure is the Greek PSI agreement event risk as deadlines for bond repayment agreements draw closer.  Some sources have suggested that Greece is reluctant to implement some of the EU-suggested austerity measures and any breaks in consensus will be viewed unfavorably by markets and put downside pressure on the currency.

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