The rebound in the financial markets appeared to be short-lived. In the commodity sector, the front-month WTI and Brent crude contracts pared the gains made yesterday. The benchmark Comex gold contract retreated to 1576 after failing to re-test 1600 yesterday. As investors await the informal EU meeting on Wednesday, the focus has temporarily turned to other countries. However, bad news predominates.

In Asia, Fitch's downgraded Japan's sovereign credit rating by 1 notch to A+ with a negative outlook as the agency viewed that Japan's fiscal consolidation plan looks leisurely relative even to other fiscally-challenged high-income countries, and implementation is subject to political risk. In response to this, Finance Minister Jun Azumi reiterated that the government will accelerate the tax and welfare reform to improve the country's finance. The RBNZ unveiled in its latest survey that the 2-year inflation expectations in New Zealand dropped to +2.41%, the lowest level since 3Q09, from +2.50% projected in February. Yet, as inflation levels remain at target range, the central bank does not feel the urgency to raise interest rates in coming months.

UK's CPI moderated to +3.0% y/y in April from +3.5% in March. This was lower than consensus of +3.1% and was driven by easing global oil prices. We expect the downtrend would continue for the rest of the year. The core number also eased to +2.15 from +2.5% in March but it was above market expectations of +2.0%. While inflation has moderated faster than the BOE had anticipated, the central bank has not implemented more stimuli since the February meeting. Today, the IMF warned that the BOE would increase its accommodative monetary easing and cut tax to stimulate the economy. As stated in the review report of the UK, fiscal easing and further use of the government's balance sheet should be considered if downside risks materialize and the recovery fails to take off. Moreover, if growth does not build momentum and is significantly below forecasts even after substantial additional monetary stimulus and further credit-easing measures, planned fiscal adjustment would need to be reconsidered.

Later in the day, the Eurozone's consumer confidence might have slipped to -20.5 in May from -19.9 in the prior month. In the US session, existing home sales probably increased to 4.6M, up +2.68%, in April from 4.48M in March.