The recovery in crude oil prices appeared to be short-lived with benchmark contracts paring gains made earlier today. The situation in the Eurozone remained in focus. While the G7 meeting has lifted sentiment, the delight would be short-lived as we do not anticipate anything concrete would come out after the discussion. Meanwhile, indicators in the 17-nation region have evidence economic weakness, intensifying concerns over the region.

As the Greek reelection approaches, speculations for Greece's exit from the Eurozone have deepened. A survey showed that the possibility of a breakup has raised to 39.4% as of June 1 from 22.0% on May 4. Comments from S&P's and rumors about China's plan about a Greek exit added to worries. In Spain, the government is working on a plan with some other EU leaders to tap direct funding for recapitalization of its banks without going through traditional EU/IMF structural adjustment. This is strongly opposed by Germany's Chancellor Merkel who instead pushed for supervision by the EU on countries' fiscal health.

Economic data in the Eurozone remained weak. The bloc's retail sales contracted -1.0% m/m in April, following a +0.3% gain in the prior month. Services PMI fell to 46.7 in May from 49.6 a month ago, indicating that the contraction in services activities has worsened. Country-wise, the declines were the steepest in Italy and Spain. In Germany, factory orders surprisingly dropped -1.9% m/m in April. The March data was revised higher to +3.2% from preliminary estimate of +2.2%.

In the US session, the ISM non-manufactruing index probably stayed at 53.5 in May. The Bank of Canada will leave the policy rate unchanged at 1% but likely deliver a much less hawkish statement after today meeting. The rapid deterioration in the global environment, especially the sovereign debt crisis in the Eurozone, is expected to affect he recovery outlook in Canada. Moreover, the slowdown in China should have negative impacts on the export sector of Canada.