Notwithstanding previous disappointments, investors continued to give the benefit of doubt to Greece. Market sentiment improved in Asia session on Monday amid optimism that bailout deal on Greece would be reached at the EU finance ministers meeting today. Also boosted confidence was Japan and China's announcement that the 2 countries would jointly support IMF's plan to assist debt-ridden European countries. In China, the People's Bank of China cut the reserve requirement ratio by -50 bps. The measure is expected to bolster economic activities in the world's second largest world economy.
EU finance ministers will meet today in Brussels to finalize a rescue package worth of 130B euro to Greece. A news reports unveiled that German Finance Minister Wolfgang Schauble remained doubtful about the ability of Greece to carry through the agreed austerity program. Yet, the market remained confident that an agreement will be reached soon. Over the weekend, Greek Prime Minister Lucas Papademos said the country has tried all necessary ways to cut spending by 325M euro.
Japanese Finance Minister Jun Azumi said its country, together with China, will respond to any funding request from the IMF which is seeking to raise as much as US$ 600B to help resolve the sovereign debt crisis in the Eurozone. Yet, both countries stated that European countries need to do more. This is a boost to the market sentiment after Chinese Premier Wen Jiabao and PBOC Governor Zhou Xiaochuan pledged last week that China would increase investment in the Eurozone.
The Chinese government decided to reduce the reserve requirement ratio by -50 bps. The cut is expected to add around RMB 400B to the financial system and boost economic activities which have slowed down since late last year. The IMF warned that China's growth in 2012 may half its base scenario if the situation in the Eurozone deteriorates further.
The US market will be close on public holiday today. Later in the week, the RBA and the BOE will release minutes for the February meeting.