Global Briefing: World Looks to U.S. for Leadership

The week is off to a quiet start. Japanese markets were closed and European markets are awaiting fresh leadership from the U.S. European stocks and bonds were pulled down early by U.S. losses after European markets closed before the weekend. The dollar is slightly firmer, but generally in a consolidative mode.

The dollar continues to find support near the 117-yen level. Market talk suggests a large player or two may be defending barrier option positions struck just below. Some participants are also wary of possible Bank of Japan intervention to ensure a smooth end of the fiscal year next week. At the same time, the dollar has not really bounced off the 117-yen level. Good demand for yen by both domestic and foreign sources is capping the greenback near 117.50-117.80 yen.

There has also been yen-buying against the euro and other European currencies. This, coupled with lingering hopes that the European Central Bank may cut rates as early as next month, has helped push the euro nearly 2 cents lower against the dollar since the middle of last week. The euro bears have a running start at the $1.08 support area. Nevertheless, the market may lack sufficient incentive or participation to convincingly cut through the bids thought to lie near there today.

European bonds are lower following the reversal of U.S. Treasury prices before the weekend. German 10-year bund yields, the benchmark in Europe, rose 4 basis points. European bourses were mixed after early losses. The German Dax and the French CAC were lower on the day as last Friday's strong gains are consolidated. ...