Europe in Turmoil
January 17, 2012 | 07:58 AM
Posted by David Mason
After the horrendous credit rating cut experienced by nine Euro zone member countries on Friday, the agency responsible for the market shakeup, Standard & Poor’s was at it again. The EFSF, or European Financial Stability Facility, lost its AAA rating. The European bailout fund has been downgraded to AA+. EFSF leaders attempted to calm the markets by claiming that the lower credit rating will not reduce the bailout funds lending capabilities of 558 billion dollars. The EFSF will be selling six month bills on Tuesday for the first time. This latest downgrade suffered by the Euro Zone may create a scenario where the single currency may have to borrow more funds from its members who still maintain an AAA rating in order to continue with their bailout plans.
After several days of credit rating slashes by S&P, Moody’s Investors Service has announced that it will reevaluate its French AAA rating this quarter. Bond markets have yet respond to a reduction in the French credit rating by S&P, in part due to Moody’s and Fitch which still give the country a perfect rating.
Chinese economy has reached its lowest growth point in the last 2 and a half years, as fears of a serious slowdown in the world’s fastest growing market slowly materialize. However, China GDP growth still managed to beat expectations, which caused the USD and the Yen to decline as investors left safe haven currencies for more risky ventures. The EUR/JPY is up this morning by 0.348% and trading at 97.60, while the EUR/USD is up by 0.505%, trading at 1.2731.
German numbers out today
After a several days of dire news in Europe, investors are hopeful that the German ZEW Economic Sentiment report will paint a more colorful picture for the single currency. In the UK, the Governor of the Bank of England will address the Treasury Committee. This may have volatile repercussions on the markets, with many political analysts predicting that the UK will leave the EU in the next 12 to 24 months.
Commodities on the rise
Almost all commodities are up this morning, with silver showing the greatest gain at 2.97% and trading at 30.392. Gold is up by 1.705% and trading at 1658.55. European indices are up this morning, despite the fiscal chaos surrounding the Euro. The DAX is up by 1.25% and currently stand at 6220.01, while the UK 100 is up by 0.37% at 5657.44. Asian stocks appear to be heading in the opposite direction of their European counterparts. The Hang Seng dropped by 1%, while the Nikkei 225 Index declined by 1.42%.