Negative sentiment continues to dominate the market as difficulty in Spain's banking system indicates contagion of debt crisis in Greece, rising LIBOR rates send funding costs higher and escalated tensions on the Korean peninsula threatens US-China relationship.

Decline in oil prices accelerate in European session. WTI crude oil slumps to 67.9 (intra-day low 67.31) while Brent crude plunges to 69.1 (intra-day low: 68.24). After falling for 9 consecutive days, premium of Brent over WTI crude declined.

Since the beginning of May, crude oil price has plummeted more than -20%. Regarding the severe decline, reactions from OPEC members are mixed. Kuwait's oil minister Sheikh Ahmad al-Abdullah al-Sabah said OPEC is 'not yet' concerned about oil price and is planning to do 'nothing' about the fall. However, Qatari Energy Minister Abdullah bin Hamad al-Attiyah warned that price below 70 would discourage them to invest. Till now, it's unlikely that the organization will hold an emergency meeting before the general meeting in October.

Given the strong correlation between crude oil price and stock market, tumble in equity markets all over the world drove oil lower. The MSCI Asia Pacific Index slipped -3.2% to a 10-month low. Indices such as Japan's Nikkei 225 Stock Average and Hong Kong' s Hang Seng Index slumped more than -3% while Korea's Kospi and Australia's S&P/ASX Index slid -2.75% and -2.96% respectively. In Europe, he benchmark Stoxx 600 Index plunges -2.50% while UK's FTSE 100 plunges more than -2% to a 8-month low.

Market sentiment weakens amid fresh worries over banking system in Spain. After the Bank of Spain announced to take over Cajasur, a savings bank located in Cordoba, 4 Spanish saving banks with over 135B euro in assets plan to merge. The moves unveiled stress in Spain's banking system and the bailout would add further pressure to the country's financial burden.

The 3-month US LIBOR has risen for 10 consecutive days and reached 0.5018%, the highest level since July 2009, yesterday. The surge in funding cost signals an increase in counterparty risk in the banking sector, hence encourages demand for safe-haven assets.

Gold demonstrate resilience in European trading despite broad-based decline in the commodity market. Despite modest pullback to 1185.2, the benchmark contract recovers to 1193, largely unchanged from yesterday's close. However, weakness cannot be ruled out as investors may take profits from gold to cover margin calls in other losing investments. Silver, platinum and palladium extends weaknesses and erase all gains made yesterday.

In NY session, the US will report S&P/Case-Shiller Composite 20 Index which probably shows an increase of +2.4% y/y in housing prices in March. Moreover, consumer confidence is expected to have improved to 59 in May from 57.9 a month ago.