Asian stocks were lower this morning as Moody’s – the credit ratings agency lowered its outlook for the European Union’s AAA credit rating to ‘negative’ and issued a warning that the AAA rating could be downgraded in the future.
Stocks fell on the news that the major export market of Europe was still suffering from an economic slowdown. Hong Kong’s Hang Seng Index fell 0.27%, Australia’s S&P/ASX200 was down 0.41%, whilst Japan’s Nikkei 225 Index dropped 0.38%.
Moody’s announced the move after ECB President Mario Draghi told officials he would be comfortable buying three year government bonds to lower borrowing costs for nations in financial distress and analyzing the EU’s key budget contributors. Germany, France, Netherlands, and the UK – accounting for approx 45% of the EU’s budget revenue – were all given negative outlooks by Moodys earlier this year – and Moody’s warned that if the credit ratings of these member states are to be downgraded, it could have a knock on effect of the overall rating of the EU.
Staying in Europe and in Spain; the Andalusia has become the latest Spanish region to request a financial lifeline from its central government with a request for 1bn euros worth of aid to be granted immediately. They join Valencia, Murcia and Catalonia in requesting bailouts over the last few weeks after an 18 bn euro public fund was set up by Madrid to aid its 17 deeply in debt autonomous regions.
The commodity markets continued their ascent with Gold and Silver reaching its highest prices in nearly half a year. As global data strengthened the case for more central bank measures to boost growth, especially in the US, China, Japan and the EU, there has been increased demand for the precious metals with Gold hitting its highet level in more than 5 months and Silver climbing to its highest price since April of this year. Gold is currently 0.61% higher, and Silver 2.67% higher as the Dollar (gold trades inversely to the USD) was further weakened overnight on stimulus talk.
Today sees the release of a report by the Institute for Supply Management on manufacturing PMI in the US which will be closely watched after a raft of negative PMI from China and Europe. However, much of the focus will be on the rising commodity markets and what emanates from Europe as EU President Herman Van Rompuy is travels to Berlin for talks with Merkel and Italian Prime Minister Mario Monti hosts French President Francois Hollande in Rome.