Eurozone Downgrades Desperate

The Week Ahead Highlights Eurozone downgrades - desperate, but not serious Important shifts in EU/ECB attitudes Increasing prospects for QE3 may reverse USD strength Eurozone downgrades - desperate, but not serious The much-feared, yet equally much-anticipated, EU sovereign credit rating downgrades have arrived. The winners were Germany, the Netherlands, Finland, and Luxembourg, which saw their AAA ratings sustained. The losers were Belgium, Austria and France, which were cut one grade to AA+. The biggest losers were Italy, Spain and Portugal, which were cut two grades to BBB+, three steps above junk. The hope was that France could maintain its AAA rating, but a single notch downgrade was not entirely unexpected. Still, it does jeopardize the AAA rating of the EFSF and the ...

LONDON (IFR) - Cash-starved Irish, Portuguese and Greek lenders have turned to punitive private borrowing facilities over recent months after maxing-out on official European Central Bank help, in an indication that some 400bn euros of emergency funding is no longer enough to keep the European banking system above water. Investment banks are privately lending tens of billions of euros to eurozone banks through repurchase deals after some lenders were left unable to tap the central bank for more money. Emptied of securities eligible to be repoed with the ECB, such as government bonds, and desperate for cash, they have become dependent on private repo markets willing to lend against riskier assets - albeit at much higher interest rates. The trend paints a much bleaker picture of the ...

The Week Ahead Highlights * Risk sentiment and markets stabilizing; rebound potential * Spanish downgrade latest threat to EUR * Easing of tensions bodes well for the EUR * EUR/GBP still sitting above key support (N.B.: Monday May 31 is a holiday in the UK and US. Market liquidity is likely to be lower and volatility may be higher as a consequence.) Risk sentiment and markets stabilizing; rebound potential Global stock markets appeared to stabilize in the past week on signs that the recent sell-off was extreme and that the global recovery was continuing. The MSCI World index managed to rebound slightly after falling to new lows for the decline, generating a sizeable 'hammer' pattern on weekly candlestick charts, a potential bullish reversal indicator. The S&P 500 also ...