Markets Steady As Risk Rally Doesn't Follow Through

Markets are relatively steady in Asia today. Initial risk rally sent aussie and sterling higher but both settled back into tight range without follow through buying. Chinese Premier Wen Jiabao warned that momentum for a stable rebound in the Chinese economy hasn't been established yet. Though, the monthly deceleration in prices should give the government more scope for macroeconomic controls. Wen pledged to do "everything possible" to support job growths and the economy and will step up policy fine-tuning in the second half this year. It's believed China could employ the tools of rate cuts, reserve requirement ratio cut, as well as targeted fiscal stimulus.

In Europe, an MRB poll revealed that nearly 74% of Greeks want the new government to renegotiate the terms of the EU/IMF bailout even if that would put Greece's euro membership at risk. Over 90% of Greeks expressed their opposition to further tax hikes or wage cuts. Meanwhile, over 60% said EU/IMF would give Greece extra time for to complete the austerity program. However, it's been emphasized by EU officials that there won't be any ground for discussion before troika returns to Athens on July 24 and carry out a review on the country's finance. For near-term, Luxembourg prime minister Juncker has assured that there will be no problems in the month of August. And it's believed that the ECB would allow Greece to delay a bond payment in August while Greece could sell three-month bills or seek other bridge financing in the meantime.

Head of EFSF Regling said in an interview that once a regional banking supervisor is created, eurozone member states could be relived from the liability for bailout from EU to banks. However, German Chancellor Merkel insisted that they haven't adopted a final position on the solution of the liability yet. Also, Merkel said it's also unresolved on whether the temporary EFSF or the permanent ESM would be used for bank bailouts. Nonetheless, Merkel is confident that she will secure majority of votes to back the bailout for Spain's banking sector this week before finance minister Schaeuble meets with counterparts on Friday.

Bernanke's testimony on Tuesday and Wednesday would be a major focus this week. The Fed chairman will likely reiterate that Fed is ready to take action if conditions warrant. But he would also refrain from hinting on the timing and the tools to be used. So those looking for sign of QE3 would likely be disappointed again. As for today, Swiss industrial production, eurozone CPI and trade balance will be released in European session. Empire state manufacturing, retail sales and business inventories will be featured from the US.