Market sentiment weakens further in European session with the euro tumbling to a 4-year low of 1.212 against the dollar. Stock and energy prices also plunge. After unexpected slowdown in China's manufacturing sector, concerns over global economic slowdown intensified as job market condition in the Eurozone worsened in April. Investors also priced in pessimistic comments from ECB that the region's banks face another 195B euro in potential write-downs to the end of 2011 in a second round of losses from the financial crisis.

Crude oil prices slide more than $3/bbl with the front-month futures for WTI crude oil dipping to as low as 71.64 while corresponding Brent futures falling to 71.51. Gold remains firm with the benchmark contract grinding higher to 1223.

Unemployment rate in the Eurozone increased to 10.1% in April from 10% a month ago. In Germany, the number payrolls decline -45K to 3.25M, the lowest level since December 2008, in May while the market had anticipated a milder drop of -18K. Jobless rate in Germany, however, dipped -0.1% to 7.7% due to lower participation rate. Economists forecast the unemployment rate will return to pre-crisis high in a few months. Poor job market data upstaged strong German retail sales which grew 1% m/m in April, following a -1.6% contraction in March.

In its bi-annual Financial Stability Review, the ECB said that banks in the Eurozone face 90B euro and 105B euro, respectively, in 2010 and 2011 in net write-downs this year on loans and securities. The amount may be higher amid 'heightened sovereign risks and possible second-round effects of the fiscal consolidation'.

Decline in stock market also leads to crude's weakness as the 2 are higher correlated. In Europe, stocks plummet with UK's FTSE 100 falling more than -2%. Germany's DAX and France's CAC 40 also losr ground, by -1.7% and -2.2%, respectively. Leading the fall was BP which slumps -15%, the deepest fall since 1992, as a 'top kill' attempt to curb oil spill in the Gulf of Mexico using heavy fluids and debris had failed.

Focus of the day turns to Canada as the BOC will likely increase its policy rate after taking it to a historical low level at 0.25% since April 2009. The country's GDP expanded 6.1% (annualized rate) in 1Q10, following a 5% growth in the prior quarter. The market had anticipated a growth of 5.8%. US' ISM manufacturing probably slowed to 59.4 in May from 60.4 in April. The index might have peaked last month for the cycle but should remain in expansionary territory, i.e. above 50, throughout the year.