Financial remained under pressure in Euroepan morning as concerns about sovereign debt crisis in the Eurozone and speculations over Greece's exit from the 17-nation region intensified. Market sentiment was further weakened by China's trade data which has shown that domestic demand in the world's second largest economy has not been strong enough.

China's trade surplus widened to $18.4B in April up from $5.40B in the prior month. Although the reading exceeded market expectations of 7.93B, it was driven by the faster decline in import growth than export growth. Exports grew +4.9%, down from +8.9% and +18.4% in March and February respectively, while imports gained +0.3% during the month, decelerated from +5.3% and +39.6% in March and February respectively. The downbeat data signaled that both domestic and global economies are experiencing downtrends.

In the Eurozone, the Greek election result has dramatically raised market speculations of the country to exit the Eurozone. However, given that over 70% of voters in Greece prefer the country to retain in the 17-nation bloc and a default on Greek sovereign debts would be disastrous for the official sectors including the IMF, the ECB and the EU. For Greece, over 70% of voters in Greece prefer the country to retain in the Eurozone although a similar proportion of them opposed austerity. Greek people would need to endure a period of harsh life after the exit. Currency devaluation would lead of huge inflation and the central bank would have to print a large amount of money to offset the deposit flight, further intensifying currency depreciation. In addition, if Greece leaves the Eurozone, it will also leave the EU. That means the country would have to give up the EU financial assistance which contribute around 3.5% of its GDP per year. It would also trigger dissatisfaction from other countries in the Eurozone as devaluation of the Greek currency against the euro would ruin competitiveness of the bloc. The likely outcome is that both sides would make some concessions in the end, without causing a Greek exit.

On the dataflow, US initial jobless claims probably increased +5K to 370K in the week ended May 5. US trade deficits might have widened to $50.0B in March from 46.0B a month ago. The BOE will likely leave the Bank rate unchanged at 0.5% and the asset purchase program at 325 pound.