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Financial markets decline in European opening amid the downgrade of Spain’s credit rating. Renewed concerns in the sovereign debt crisis in the Eurozone hurt market sentiment. In Asia, the Bank of Japan expectedly eased monetary policy but increasing the size of the Asset Purchase Program so as to boost the economic recovery and inflation. European bourses gapped down at open. In the commodity sector, gold eased after Thursday’s rally after the FOMC meeting.

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Spanish Credit Rating Downgraded

The euro’s foreign exchange rate fell at open this morning and continues to follow a sliding trend lower as shrinking order books and rising job losses in Europe affected both manufacturing and service sector business, whilst elections in France and debt problems for Spain weighed on the currency.

In the European foreign exchange market, the euro was weaker against the US dollar. The euro was recently trading at $1.3180, from $1.3215 late Friday in New York. against UK sterling, the euro hits a new 12 month low of 1.224 euro.

French Elections

“The euro will have to contend with political events as it digests the aftermath of the first round of the French presidential elections. The fact that the political process will continue to a second round on 6 May could act as a constraint on the euro,” said Crédit Agricole Corporate & Investment Bank.

The euro and the dollar exchange rate “will largely remain within its recent range although developments in Spain and Italy and their debt markets will have the potential to invoke larger moves in the euro,” it added.

European Business Data

April’s PMI for the euro zone’s dominant service sector fell to 47.9 from 49.2 in March – a five-month low and worse than any forecast in a poll of more than 40 economists which projected a rise to 49.3.

The services PMI slipped further below the 50 threshold that divides growth from contraction in April, while factories endured their worst month since June 2009.

“We were saying last month that we probably had a second consecutive quarter of decline (in business activity), making a recession – now that’s extending into a third quarter,” said Chris Williamson, chief economist at PMI compiler Markit.

Order books brought no joy for services companies in April, with the services new business index slumping to a six-month low of 45.4, from 47.6.

“There are no real drivers of growth here, which suggests that although the overall rate of decline is modest at the moment, we could see it continue to worsen in coming months.”

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Euro foreign exchange rate falls further as latest business data shows grim picture

The euro’s foreign exchange rate dipped against the US dollar, UK sterling and other major currencies on Wednesday after the French President Sarkozy said that a strong euro currency is hurting exporters and should be discussed with the ECB.

The euro currency hit a session low of $1.3087 against the US dollar yesterday, falling around 0.3 percent on the day.

Market players said the euro could come under further pressure ahead of a Spanish bond auction on Thursday, and poor demand and high yields at the auction would aggravate concerns about Spain’s fragile fiscal position.

“The euro is in a very narrow trading range as we wait for tomorrow. There is a lot of uncertainty in the market and people will speculate on a bad outcome, which should be a burden for risky assets,” said Lutz Karpowitz, currency strategist at Commerzbank.

The euro has traded roughly between $1.30 and $1.35 since January, and has struggled to rise above $1.32 since early April. CitiFX Wire said in a note that its traders were looking to buy the range-bound currency on dips.

IMF Warns on Euro Collapse

The eurozone could break up and trigger a global economic slump to rival the Great Depression, the IMF warned last night. In its World Economic Outlook report, the International Monetary Fund said the collapse of the crisis torn single currency could not be ruled out.

It was the first time the Washington based institution has accepted the prospect of the eurozone splitting up and follows fears over the health of the Spanish economy.

“Things have quietened down but there is a very uneasy calm. I have a feeling that at any moment things could get very bad again.” said IMF chief economist Olivier Blanchard.

Speaking at the launch of the half yearly report in Washington, Mr Blanchard said there was no plan in place to deal with a country leaving the euro.

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Euro foreign exchange rate takes a hit following Sarkozy’s export comments

Brent oil futures open today’s trading session holding near $118 a barrel as the spread between Brent and US WTI crude, the North Sea and US benchmarks, narrowed to its tightest margin in 3 months yesterday on hopes that the oil glut around an important US delivery point would ease soon.

Latest Brent Oil Price

In London, Brent crude oil futures for June 2012 delivery was trading at $118.53 a barrel, 08.15 GMT today on the ICE Futures Exchange.

Brent to WTI Oil Spread

The Brent to WTI spread, which rose to as high as $21.91 a barrel at the start of this month, narrowed to just $13.63.

The spread was also affected by the decline in Brent to a two month low after Iran said on Monday it had agreed to further talks with western countries over its nuclear programme next month.

Goldman Sachs said the widening of the WTI-Brent spread was caused by a sharp fall in Canadian crude on the physical markets as inventories have risen sharply around ­Chicago.

This in turn caused more oil to flow from Chicago to Cushing, which then was shipped back to Wood River in Roxana, Illinois.

However, the bank added that, with the Seaway reversal easing the bottleneck at Cushing, WTI prices would rise closer to Brent prices in the second half of this year.

“I think it’s the big unwind of two markets, Brent and RBOB, that were out of proportion to the rest of the complex.” said a New York based trader.

Iran’s Nuclear Program

Also helping to cap Brent prices and reduce the premium to US WTI crude were Saturday’s talks about Iran’s nuclear program. The revived discussions with Tehran and major powers eased the threat of immediate supply disruptions in the region.

The specter of a regional conflict as Iran declined to curb its disputed nuclear program helped Brent prices surge to a 2012 peak above $128 a barrel in March, a 19 percent rise from the end of 2011.

Recovering Libyan oil exports and higher output from Saudi Arabia and Iraq helped check the price surge, along with the West mulling strategic reserve releases as governments around the globe fretted about the effect of high oil prices on economic growth.

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Brent oil holds near $118 as price spread to US WTI crude narrows

The price of Brent crude oil futures opens Monday’s trading session at $123 a barrel as last weeks decline in oil prices seem to have hit a bottom after talks over strategic oil reserve releases had crude on the back foot.

Latest Brent Oil Price

In London, Brent crude oil futures for May 2012 delivery was trading at $123.06 a barrel, 07.56 GMT today on the ICE Futures Exchange.

Last Friday, Brent crude oil futures for May delivery rose $0.49 to settle the week at $122.88 a barrel.

Strategic Oil Reserves

Western countries could tap their strategic oil reserves to try to rein in rising oil prices, as several are considering, but analysts warn it may have only a limited and temporary effect.

It’s important to save strategic oil reserves for when they’re really needed. If oil reserves are drawn upon every time oil prices trade higher, eventually the reserves will be gone, leaving no buffer to deal with genuine emergencies.

Last week, French officials disclosed that Washington had proposed dipping into it’s oil reserves, the clearest indication yet that major consuming nations may act to counter the recent surge in prices. The comments pushed down both Brent and WTI oil prices but they began to climb back up on Friday as it became clear that no moves were imminent.

With Brent crude soaring over $126 a barrel in London at the beginning of last month, levels unseen since 2008, there are increasing concerns fuel costs could damage a still fragile global recovery.

Analysts doubt that that a coordinated release of oil stocks by major industrialised nations, which they did during the Libya conflict last year, would have a lasting effect on oil prices.

“A tactical use of the reserves would certainly have an impact on the market but it would be temporary because the underlying problem is an increase in demand while supply is limited by constraints on production.” said Luca Baccarini at Energy Funds Advisors.

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Brent oil price opens trading at $123 as last weeks decline hits bottom

Financial markets began the week with a firm tone as China’s manufacturing data improved, easing concerns of hard-landing, and EU finance ministers agreed to the raise the ceiling of the rescue fund. The MSCI Asia Pacific Index climbed around +0.5% in the morning session. In the commodity sector, crude oil prices also recovered from the sharp fall late last week while gold also strengthened a tad as the euro rose.

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Sentiment Boosted by Rise in European Firewall and Strong Chinese PMI