The European session is under way with the main equity indices showing an average loss of 0.2% in morning trade ahead of the US Employment Report for January. Negotiations between Greece and private bondholders are expected to conclude over the weekend and the markets cannot wait.

In the foreign exchange market there were no major moves, which is typical ahead of a US payrolls data. The euro/dollar continued to trade above 1.3100 while the euro/yen remained above 100. The dollar/yen was trading flat at 76.20. It is believed that the Bank of Japan may intervene if it falls below 76. Meanwhile, the euro/swiss franc faced a similar situation near the 1.20 mark with Swiss National Bank interim Chairman Thomas Jordan saying yesterday that his central bank was going to defend that level.

The pound sterling remained strong with the 'Cable' (pound/dollar) above 1.58 and the euro/pound at 0.83. Carry trade currencies were relatively weak, especially the Kiwi.

On the macroeconomic agenda, we see that PMI services for January rose to 51.0 from 50.4 in Japan and to 51.9 from 49.0 in Australia. In China, this indicator remained steady at 52.5 and in India it rose strongly to 58.0 from 54.2.

Later today, there will be PMI services for January in Spain, Italy, France, Germany, UK, and Eurozone. There will be CPI data in Italy and retail sales data in the Eurozone. In the US, the ever so important Employment Report for January will be released along with ISM non-manufacturing for January and factory orders for December.

We must point out that Dallas Federal Reserve president Richard Fisher spoke in Austin, Texas, yesterday and said that the Fed's outlook on interest rates was mere speculation and not binding in any way.

Chicago Fed president Charles Evans indicated that the Fed needs a commitment to keep rates low or a third round of quantitative easing in order to stimulate the struggling economy.

Finally, the IMF believes that the world economy may need additional stimulus to the tune of $2 trillion.

FM

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