Consolidations Continue, Focus Shifting To Wednesday's EU Summit

Markets continue to consolidate as focus is gradually shifting to the informal EU summit on Wednesday. Two topics are expected to be discussed, growth and eurobonds. Anti-austerity voice gained much momentum in recent months and European leaders are expected to discuss some growth strategies to counter that. European Council President Van Rompuy noted that this week's diner meeting will pave the way to decisions on growth measures in the formal summit in June. Meanwhile, ECB Executive Board Member Asmussen noted yesterday that's the discussion shouldn't be growth versus austerity as the eurozone needs both. Asmussen said that the " fiscal compact can be complemented by growth-enhancing measures" but the "fiscal compact cannot be renegotiated or softened."

French President Hollande is expected to push for eurobonds during the meeting. The move is expected to receive support from Italy, Spain and European Commission. However, Germany has reiterated it's opposition stance. German deputy finance minister Kampeter said that the eurobond is a "prescription at the wrong time with the wrong side effects." Meanwhile, Chancellor Merkel's spokesman said that eurobonds are "no way to overcome the current crisis" and it's "still the case that the government rejects euro bonds."

Yen and BoJ will be another major focus in the next 24 hours. Japanese Finance Minister continues to pressure BoJ to take "appropriate" policies. The Japanese yen was sold off sharply back in February after BoJ surprised the markets by expanding easing and adopting a 1% inflation target. However, the yen then lost steam and reversed last week as markets were clearly dissatisfied the act to add another JPY 10T into the asset purchase program. Further buying was seen in yen last week as global financial markets situation worsened and speculation of Fed's QE3 was revived. The yen could extend recent rally later in the week should BoJ stand pat or even did some small steps.

As for today, UK data will be a main focus. Public sector net borrowing is expected to be GBP -22.8b in April. CPI is expected to slow sharply from 3.5% yoy to 3.1% yoy in April, and that will be just slightly above BoE's target of 2-3%. Eurozone consumer confidence and US existing home sales will be released later in US session.