Oil-rich South China Sea.

Tensions between China and Vietnam escalated over the weekend as each nation accused the other of violating its sovereignty in the oil-rich South China Sea.

PetroVietnam, the state-owned oil and gas monopoly, said on Sunday that China had sabotaged Vietnamese oil exploration vessels, the latest accusation between the countries over the disputed waters.

"When we conduct seismic survey and drilling operations, they [China] have aeroplanes flying over to survey our activities, they harass us with their vessels, and in extreme cases they cut our [exploration] cables," said Do Van Hau, a senior PetroVietnam official.

The renewed tensions come as Liang Guanglie, the Chinese defence minister, and Robert Gates, his US counterpart, prepare to attend the Shangri-La Dialogue, a high-profile annual Asia defence forum in Singapore next weekend. Liang's appearance will mark the first time a Chinese defence minister has participated in the meeting.

The Vietnamese harassment claims will put the South China Sea issue back in focus ahead of the regional security meeting, which in recent years has increasingly focused on Chinese maritime behaviour in the disputed waters. South-east Asian countries are concerned about what they perceive to be Beijing's increasingly assertive behaviour in regional waters.

The rising tensions have also attracted the attention of Washington. Hillary Clinton, US secretary of state, angered Beijing last July by insisting that the South China Sea was of strategic importance to the US and offering to act as a mediator.

In addition to China and Vietnam, Brunei, Malaysia, the Philippines and Taiwan all claim part or all of the South China Sea, which is believed to contain vast oil and gas reserves and incorporates key trade routes and abundant fish stocks.

On Sunday, PetroVietnam said the Chinese boats that approached one of its vessels on Thursday had deliberately cut an exploration cable, which had been submerged to 30 metres to protect it from oncoming ships.

PetroVietnam is working with a number of large international oil companies, including ExxonMobil and Chevron, to explore and develop oil and gas assets in South China Sea waters claimed by Vietnam. Hau said that this latest incident "will impact on the attitudes of foreign investors".

Carl Thayer, an expert on the South China Sea at the Australian Defence Force Academy in Canberra, said that this latest incident represented an escalation in Chinese aggression toward Vietnam.

"China is brazenly asserting its sovereignty by such actions and it has the preponderance of vessels to enforce this," he said.

Just before 6am on Thursday, three Chinese patrol ships rushed the Binh Minh 2, a seismic survey ship owned by PetroVietnam, damaging a number of cables, according to Vietnam's foreign ministry. The oil exploration vessel had detected the Chinese ships approaching on radar about an hour earlier without warning.

The encounter took place 120 nautical miles off the coast of Phu Yen province in south-central Vietnam, in waters that are claimed by both China and Vietnam.

China routinely detains Vietnamese fisherman who are plying their trade in disputed waters but this is the first time in recent years that Chinese patrol boats have clashed with a Vietnamese oil exploration vessel. A Philippines-licensed oil survey ship suffered a similar confrontation with Chinese patrol vessels in March.

The clash comes just a week after China and the Philippines pledged "responsible behaviour" in the disputed areas and repeated their commitment to a peaceful resolution of conflicting territorial claims. During a visit of Liang Guanglie, China's minister of defence, to Manila last Monday, officials from both governments pledged to avoid unilateral moves which could raise tension.

Philippine President Benigno Aquino said after the visit incidents in disputed areas could trigger a regional arms race, and force the Philippines to strengthen its military capabilities.

Security experts have said that such an arms race is under way already. Several south-east Asian countries are beefing up their air and sea defences - Singapore, Malaysia, Vietnam and Thailand have all acquired or placed orders for frigates, fighter aircraft and submarines.

Neither the foreign ministry nor the defence ministry in China responded to requests for comment.-by Ben Bland, Kathrin Hille
The Dow is 12 market days to Quadraple Witching.(Half yearly window dressing)
Economic news:Motor vehicle sales,ADP employment report,ISM manufaturing Index & Construction spending.
Quantitative Easing ceased 30/6/11.
9:30am:--The mid-week(pivot) will always have a high degree of pullback or retracement.A bearish unshaven top opening for the start of a half yearly witching closing month.
10:30am:--Bears still in control at first hourly low.
Weak private sector job growth numbers are in the news.
11:30am:--A slight retracement but a bearish harami pair warning.There were concern of May figures which will be released by the government.
12:30noon:--A new morning low.Hammering again.Payrolls firm ADP reported non-farm private sector employs 38,000 jobs in May which was below consensus.
1:30pm:--Consolidating near the low.Bearish hammer.
2:30pm:--Dark clouds hanging near session low.
3:30pm:--Aggressive bears in control for the day.Weak economic data is the theme play today.
4:00pm:--A mild technical rebound at the close.
There were hints that the Labour Department is expected to report on Friday that the May unemployment rate will remain unchanged at 9.0 percent from April.
Weak economic data casted more doubts to market players today but this is an overdone scenerio.
The month of May candle(typo error on chart,not June) has a two way swing.Candlestick at the beginning of first day of June has completed its mission of covering the lower shadow.Look forward to another short-covering when the bulls take to the street.