Monday 23:00 BST. Traders were cautiously optimistic at the end of the session, pushing risky assets higher as markets struggled for direction throughout a choppy day.

The FTSE All-World equity index was down 0.1 per cent, but core bond yields, though still depressed, are slightly higher on the day, and the euro and oil are a bit stronger.

Activity in Asian trading was curtailed by Tokyo’s closure for a public holiday, while European markets were beat up following reminders from the periphery that the road to fiscal stability is long and difficult.

But the S&P 500 in New York was up 0.6 per cent, buoyed by continued support from company earnings. Halliburton, the oil-services giant, said profits were up 83 per cent, though it warned of future disruptions related to the oil leak in the Gulf of Mexico.

Bulls could only do so much, however, restrained by news from the critical housing sector that US homebuilder confidence has hit a 15-month low.

”Housing has been and will remain an anchor around the neck of the US economy,” said Tom Porcelli, US market economist at RBC Capital Markets. “Housing tends to lead recoveries and its knock-on effects, like the spending associated with filling those houses, are momentum generators. Our sense is what’s left of this recovery will have to continue with no help from the housing sector.”

The second-quarter earnings season now moves into its second week, during which 122 S&P 500 companies will report – tech giants IBM and Texas Instruments reported after the closing bell. Both reported growth in sales and revenue. IBM missed sales expectations, however, though the company said that it was not seeing any slowdown in business spending.

But already the feeling is growing that the recent deterioration in macroeconomic data, notably the lack of help from housing, means the forecasts from chief executives of current trading carries ever greater heft than the backward-looking top and bottom lines.

And if that hadn’t made investors sufficiently cautious, government budget stress has made an unwelcome return.

Hungary’s failure to agree a fiscal strategy with the International Monetary Fund and European Union has revived worries about eurozone exposure to struggling eastern European states, while a Moody’s downgrade of Ireland also reminded investors of the tough battle still being fought even by those seen as more willing to bite the austerity bullet.

Friday’s coming revelation of the eurozone bank stress test results can only heighten the anxiety.

It should be noted, though, that there are some more wholesome nuggets on which bulls can chew. Philips, the Dutch electronics bellwether, has exceeded earnings expectations and, crucially, raised its margin forecasts. Delta Air Lines missed expectations but still reported growing earnings and revenue on a pick-up in flier demand.

The $1.7bn private equity purchase of Healthscope, the Australian hospital chain, and the Nokia Siemens mobile venture’s proposed deal to buy Motorola’s mobile infrastructure assets, are the latest in a line of deals that illustrate the improved health of capital markets and show that value can be discerned by some operators.

Overall, however, relatively low volumes, with traders still a bit too anxious – the Vix index of US market volatility was still elevated, at 26 – to put on big positions, have left markets searching for direction. Correlation between risky assets and stock sectors has not been strong. That’s likely to be a theme for the summer.

Forex. The euro retreated from its recent highs following the Ireland downgrade and news out of Budapest. The wave of buying pushing up the single currency of late supported it. The euro rose 0.1 per cent versus the dollar to $1.2946.

That could be interpreted as showing that forex traders are more concerned about the relative economic health of the US against the eurozone – as illustrated by a narrowing of bond yield differentials. However, the safe-haven impulse prevailed, as the dollar index, measuring the buck against a trade-weighted basket of currencies, was up 0.1 per cent.

But the fact that the euro was up 0.4 per cent against the yen to Y112.40 – a cross that would be expected in more cautious times to move lower – suggests traders were becoming somewhat inured to tales of eurozone woe. For the time being, at least.

The Hungarian forint is down 2.6 per cent versus the euro since Friday’s close.

Debt. Credit traders appear more worried about the eurozone’s fiscal condition than their currency cousins. Spreads for sovereign debt considered more likely to default are widening. Credit default swaps – which track the cost of insuring debt against non-payment – are higher. Moody’s downgrade of Ireland has pushed CDS on Dublin’s debt up 17 basis points to 265 basis points, according to Markit. Hungarian CDS are up 55 basis points at 377 basis points.

The more timid mood is helping keep Treasury yields near recent lows. The 10-year US note, nevertheless, made a more decisive late move, up 5 basis point at 2.97 per cent.

Europe. Bourses tracked Wall Street’s extra losses and opened lower. A pick-up in S&P 500 futures, the euro’s stoic display and some bid chatter then saw stocks move into positive territory, before relapsing again. The FTSE Eurofirst 300 is down 0.6 per cent. The FTSE 100 in London fell 0.2 per cent, with BP again proving a drag, but miners reversed the negative sentiment towards the sector seen in Asia.

Dublin fell 1 per cent and Budapest lost 2.9 per cent on the Moody’s and IMF news respectively.

Commodities. In choppy trading oil was up 0.6 per cent at $76.49 as traders prepare to switch over to the new September contract.

Metals were mostly higher following heavy falls last week but this is not sufficient to keep the Reuters-Jefferies CRB index in the black. The benchmark was down 0.4 per cent.

Gold was down 0.7 per cent at $1,184 an ounce, having earlier hit a two-month low of $1,177 with traders citing the removal of risk premium – though that appeared contradictory to the broad trend elsewhere.

Asia. The FTSE-Asia Pacific index fell 0.9 per cent as the region absorbed the sharp fall in New York at the end of last week and fretted about the impact on exports of a struggling US consumer. Sydney, in particular, suffered from those lower growth fears, with miners in the cross-hairs. The S&P/ASX 200 closed down 1.5 per cent.

However, falls were tempered among later-closing markets after Shanghai put in a strong afternoon performance as soothing comments about policy and economic prospects from premier Wen Jiabao encouraged “bargain” hunting. The CSI was up 2.1 per cent, helping Hong Kong to trim its losses to 0.8 per cent.

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