Sentiments Weighed Down by Greece, Moody's, Dollar Firmer

Market sentiments are weighed down by the delay in Greek bailout approval and Moody's warning on downgrade of some global banks. Asian equities are broadly lower following -97 pts fall in DOW. EUR/USD remains soft and is back pressing 1.3 psychological level. Commodity currencies are also generally lower following mild risk aversion. We'd like to point out again that Dow continues to face strong resistance between 12800 and 13000 and is very vulnerable to reversal. And when that happens, most major currencies could weaken sharply against the dollar. The development in the next few days remains critical.

Greece Finance Minister Venizelos believed Greece has met all conditions for the EUR 130b second bailout from EU/IMF already. And Luxembourg Prime Minister Juncker hailed that Greece has made "substantial further progress" and detailed the EUR 325m additional spending cuts. However, "further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of program implementation". However, Juncker also noted that "further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of program implementation". Juncker is still confident that "Eurogroup will be able to take all necessary decisions on Monday February 20". But that is far from being certain. It's reported that Finland and the Netherlands had appealed for the postponement of a new program until elections as early as April before the conference call.

Focus will temporarily turn to bond auctions in France and Spain today. France targets to sell a maximum of EUR 8.5b in 2-, 3- and five year bonds today while Spain targets to sell a maximum of EUR 4b in debt maturing in January and July 2015 as well as October 2019. Moody's downgraded Spain's debt rating by two notches to A3 earlier while Franc's Aaa rating outlook was lowered to negative. But the rating changes should have little impact to the bond auctions today.

Moody's placed over 100 financial institutions in 16 European countries on review for possible downgrade. Those institutions include familiar names like Barclays, BNP Paribas, Commerzbank, Credit Agricole, Deutsche Bank, HSBC, ING Group, Royal Bank of Scotland, Santander, Societe Generale and Unicredit. Moody's noted that government's support towards the banking systems and accommodative policies are "overshadowed by the prolonged adverse impact of Eurozone debt crisis.

The FOMC minutes for the January meeting released overnight were as dovish as the policy statement suggested. Yet, the change in wordings suggested that there were fewer members demanding further easing. Policymakers noted that 'strains in global financial markets continued to pose significant downside risks to the economic outlook' and 'a few members' observed that elevated unemployment and subdued inflation pressure could 'warrant the initiation of additional securities purchases before long'. In December, it's stated that 'a number of members' judged additional purchases are warranted. In our opinion, QE3 remains possible for 2H12 despite recent improvements in economic indicators.

On the data front, New Zealand business manufacturing index dropped to 50.5 in January. Australian job market expanded more than expected 46.3k in January, largest number in 14 months. Unemployment rate unexpectedly dropped to 5.1%. US data will be the main focus today with PPI, jobless claims, Philly fed survey and new residential construction featured.