httpvh://www.youtube.com/watch?v=DIkiwo8Gu9A

Focus remained on Europe over the weekend as news reached us that a Spanish regional lender had to be propped up by the Spanish central bank so as to not completely roll over. Cajasur, a Spanish Caja or building society, will receive money from the state until its balance sheet is back to some semblance of health. While Spain and its banks were relatively unhurt by the subprime crisis they are being hurt by regional squeezes as the combination of repossessions and high unemployment begins to weigh.

This has weakened the euro in  Asian trade this morning as, given the size of the economy, Spain is the one member of the PIIGS which a debt crisis would be a devastating move for the euro and the EMU as a whole. The likelihood at the moment of further euro losses is high.

Sterling is in for an interesting beginning to the week as George Osborne and David Laws, Chancellor and Chief Secretary to the Treasury respectively, lay out the first round of cuts in order to deal with the UK’s fiscal problems. £6bn is due to be cut from the public sector and will be centred around a stop in hiring for civil service jobs, reduction in expenses for ministerial transport and the abolition of certain quangos. This is before the Queen’s Speech and the release of the second estimate of GDP for the 1^st quarter tomorrow.

Asian equity markets have performed well this morning and European equity markets should continue the trend today. This would lead to risky assets receiving a little more backing than before and allow the euro to ease higher.

The data calendar is dead today with only US existing home sales (14.00) of note.