• Spanish union says to challenge royal decree on public wage cuts
  • Spain government to pass wage cuts through royal decree at cabinet meeting thursday. Cuts to affect June-December paychecks – Govt representative
  • Merkel: Eurozone is sticking together, ready to take necessary political action
  • Dubai World agrees in principle with key negotiating banks to restructure $23.5 bln debt – statement
  • Shanghai stock index down 1.2%
  • British Airways union wins appeal against legal block on strike action
  • French EconMin Lagarde; We must defend euro
  • EU’s Almunia: Best exchange rate for currency is that decided by market, doesn’t see intervention necessary to support euro
  • UK retail sales inc fuel +0.3% m/m, +1.8% y/y, pretty much in line with median forecasts +0.4%, 1.8% respectively
  • German April PPI +0.8% m/m, +0.6 y/y, stronger than median forecasts +0.6%, +0.4% respectively
  • BOE’s Posen; UK has too few banks, they are too large, and this is interfering with Uk’s recovery

Market still loathe to embrace risk, European stocks after a promising start have turned sharply lower, DAX off 1%. Oil off over 1 1/2 bucks.

Commodity currencies have been hit hard with yen as usual a major beneficiary. AUD/JPY has fallen sharply down at 74.95 from early 77.25 having been as low as 74.85. Fund selling has been notable.

AUD/USD down at .8260 from early .8425 with only periodic Asian sovereign buying slowing the move.

USD/CAD up at 1.0615 from early 1.0455. We stalled around 1.0540 when a large European corporate stepped in selling decent amounts, but it wasn’t enough to turn back the tide for long.

EUR/USD at 1.2335 slightly lower from early 1.2360. Decent buying by UK clearer said to be on behalf of Middle Eastern entity helped get the pairing back well over 1.2400 but Asian sovereign and hedge fund selling ensured the respite didn’t last long. News that Spanish union to challenge royal decree on public sector wage cuts hardly helped euro’s cause.

Cable down at 1.4285 from early 1.4400, not helped by heightened risk aversion. News that British Airways union had won its appeal against block on union action didn’t help.

EUR/GBP up at .8635 from early .8575 with Middle Eastern sovereign sales capping at .8651.