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 The dollar gave up some of the ground it made against other major
currencies on Friday after strong jobs data brought forward
expectations of when the U.S. interest rates might rise.
In Europe, eyes were on Greece after Prime Minister Alexis Tsipras
on Sunday ruled out extending the country's bailout and said he
would reverse some of the reforms imposed by its lenders,
jeopardizing its finances and its place in the euro club.
His speech came after Standard & Poor's on Friday cut Greece's
sovereign debt rating and Moody's put its rating on review for
downgrade.
"The immediate headline reaction was that this speech would make it
much more difficult for Greece to come to an agreement with its
European partners and thus the risk of Greece leaving the euro zone
was now higher than ever," said Gary Jenkins, chief credit
strategist at LNG Capital.
Jenkins said there was now a 50 percent chance of a 'Grexit'.
Athens' stock market slipped around 5 percent and, with the
European Central Bank set to pull the plug on its funding to Greek
banks on Wednesday, the country's banking index was down around 8.5
percent.
Broader European shares tracked earlier losses in Asia. The
pan-European FTSEurofirst 300 index fell 1.1 percent, with Germany's
DAX down 1.6 percent , France's CAC down 0.9 percent and
Britain's FTSE down 0.8 percent.
Greek 10-year bond yields shot up 87 basis points to 11.3 percent,
while three-year yields rose to around 20 percent.
Fallout for other low-rated bonds was relatively contained with
Portuguese, Italian and Spanish equivalents up between 4-8 basis
points while top-rated German Bund yields dipped 4 bps to 0.34 pct.
There is a 40 percent chance that 10-year German bond yields could
turn negative this year, said RBS on Monday, with the Greek
situation accelerating a move caused by the European Central Bank's
upcoming bond-buying scheme.
"Turbulence from Greece helps Bunds to perform and accelerates the
fall in yields towards zero," said Marco Brancolini, a rates
strategist at RBS.
UGLY DATA
China's trade performance slumped in January, data on Sunday showed,
with exports falling 3.3 percent from a year ago while imports
tumbled 19.9 percent, far more than analysts had expected,
highlighting deepening weakness in the world's second-largest
economy.
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"The trade data is ugly, which points to a weaker economy ahead,"
said Wang Mingli, strategist at Guoyuan Securities in Shanghai
The poor figures took some of the shine off Friday's robust U.S.
payroll gains of 257,000 in January, which also showed a rebound in
hourly wages.
The U.S. data caused traders to move forward their rate hike
expectations, with money market futures fully pricing in an increase
by September compared to around October before the data.
The prospect of an earlier U.S. rate hike is weighing on many assets
that have benefited from low rates, while boosting U.S. bond yields
and underpinning the dollar.
The dollar's index against a basket of six major currencies held
onto most of its 1.1 percent gain on Friday and stood at 94.587, not
far from an 11-year high of 95.481 hit last month.
The euro traded at $1.1329, up around 0.1 percent against the
dollar.
Oil prices dipped as the slump in Chinese imports pointed to lower
fuel demand in the world's biggest energy consumer. Brent oil
futures fell 0.2 percent to $57.66 per barrel, off a six-week
high of $59.06 touched on Friday.
Gold rebounded slightly from a three-week low of $1,228.50 per ounce
touched on Friday as share prices eased, trading at $1,243.20.
(Additional reporting by Samuel Shen and Kazunori Takada in
Shanghai; Editing by Hugh Lawson and John Stonestreet)
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