Moody's cuts Greece's sovereign debt rating - 7.3.2011

Asian markets were mixed on Monday as higher oil prices continued to hurt sentiment, while the resignation of Japan's foreign minister added to the gloom in Tokyo.

Japan's Nikkei Stock Average was off 1.9 %, while index S&P500 fell 0.74% on Friday, pair EURUSD traded 1.3954-1.3998 and pair USDJPY 82.03-82.38. Dow Jones Industrial Average futures are down 41 points in screen trade. Intensified fighting in Libya over the weekend raised the chance that the country will descend into civil war. April Nymex crude oil futures hit their highest level in two-and-a-half years, up $1.90 at $106.32 per barrel on Globex, extending the contract's $2.51 surge Friday. Spot gold was at $1,436.10 per troy ounce, up $3.30 from its New York settlement Friday. The U.S. Labor Department released its monthly nonfarm payrolls report Friday, which showed that the economy added 192,000 jobs in February. Economists had been expecting an increase of 218,000 jobs.

Euro

Early Monday, Moody's cut Greece's sovereign-debt rating to B1 from Ba1, with the agency raising the specter of a debt restructuring. The move reminded investors that the euro-zone debt crisis is far from over, as market participants continue to bet that Portugal may need to follow Greece and Ireland in accepting a bailout. The euro took a breather against the dollar and the yen although expectations of widening interest rate differentials continued to underpin the single currency: the European Central Bank last week hinted it will hike rates next month, while the U.S. Federal Reserve is likely to remain on hold for the time being, particularly after a slightly disappointing U.S. nonfarm payrolls report Friday.

JPY

Japanese stocks were dragged lower by higher oil prices as well as growing domestic political turmoil. Japan's Foreign Minister Seiji Maehara, one of the country's more popular politicians, resigned Sunday over illegal political donations from a foreign national. His exit further complicates the job for Prime Minister Naoto Kan, whose Democratic Party-led government already faces gridlock in the opposition-controlled Upper House over budget-related bills.

"There is caution over the risk of a (further) downgrade in Japan's sovereign debt rating if political uncertainty deepens," said Hisatsune Kobayashi, a senior market analyst at Nikko Cordial Securities. The yen was little moved by the Japanese foreign minister's resignation. The dollar was at 82.22 yen, from 82.30 yen late Friday in New York. Lead Japanese government bond futures were up 0.43 at 139.78 points and the 10-year cash JGB yield was down two basis points at 1.275%. "The current supply-demand balance should discourage a rise in yields," said Barclays Capital strategist Chotaro Morita. He added that there were growing concerns Japan will hold an early general election that risks "the emergence of a government that includes parties opposed to a consumption tax hike."