Market sentiment soured with European bourses leading the decline. The Stoxx600 plunged -2.21% with both financials and base materials losing more than -4.0%. Wall Street also dropped with DJIA and S&P dropping -2.26% and -2.47% respectively during the day. In Asian session today, risk appetite remained fragile as disappointing Chinese PMI, which slid to the lowest level in almost 3 years, added to worries. In the commodity sector, crude oil traded with great volatility but ended the day with only mild loss. Gold fell for the first time in 7 days with the benchmark Comex contract dipping -1.26%.

Ahead of the November FOMC meeting and the G-20 summit, news from the Eurozone has once again caught attention. The Greek Prime Minister George Papandreou announced a referendum on the new European agreement and a vote of confidence on the government in the Greek parliament in coming days. This has created uncertainty about the sovereign debt crisis in the debt-ridden country as well as the entire 17-nation region.

The Greek Prime Minister Papandreou said a referendum is need for passage of the new EU agreement. Meanwhile, he also needs a vote of confidence in parliament which will begin tomorrow and end on November 4. There's possibility for the government to lose the referendum as survey showed that 59% of respondents were against the new EU agreement, although 73% wanted to stay in the Eurozone. In case of a loss, new elections would have to be held but it would take place after 3-4 weeks after the parliament is dissolved. During the political vacuum, austerity measures being implemented in the country will be suspended. In a likely circumstance that the opposition party will win the early election, renegotiation of all deals may be needed. Of course, EU leaders' reaction by then is also highly uncertain. Under such scenario, it's unknown whether the IMF will withhold its funding (2.2B euro) to Greece which is expected to be disbursed in mid-November.

The official Chinese PMI plunged to 50.4 in October (consensus: 51.8) from 51.2 a month ago. The reading fell to the lowest level in almost 3 years as 'new order' slumped to 50.5 from 51.3. Weakness in new orders was in turn driven by 'new export orders' which plummeted to 48.6 from 50.9. The situation indicated that economic growth in China has been facing more external risks than domestic risks. The manufacturing data further evidenced that Chinese economy is slowing. This may give the government some thoughts on monetary stance. Yet, we do not envisage a rate cut this year.