Key news
The US equity and bond markets were closed yesterday for the Thanksgiving holiday.
The sentiment in the equity markets remains negative on the back of the comments from German chancellor Merkel regarding euro bonds. She again rejected the idea as a possible solution to the debt crisis and a stabilisation mechanism for the EU sovereign bond market. The Asian equity markets have followed the negative trend and most Asian indices are down this morning. Hang Seng has lost 1.3%, while Nikkei is one of the few indices that has gained this morning, up 0.3%.
Hungary lost its investment-grade rating at Moody’s yesterday as the Hungarian government is seeking IMF support to boost confidence in the EU’s most-indebted eastern member. Hungary was downgraded from Baa3 to Ba1: “The first driver of today’s downgrade is the uncertainty surrounding the Hungarian government’s ability to meet its targets on fiscal consolidation and public sector debt reduction,” Moody’s said in its statement. “Hungary’s recent requests for assistance from the IMF and the EU illustrate the funding challenges facing the country”.
In FX markets there have been small movement in major crosses. EUR remains under pressure against USD and JPY on the back of the EU crisis and is testing the 1.33-level against USD. EUR/SEK has moved above the 9.27-level in Asian trade this morning. The similar picture is found in NOK, which has been range-bound at the 7.85-level against the euro.
Global Daily
Focus today: With no important releases on the agenda today focus will remain on the developments in the European sovereign debt markets. ECB’s Gonzales-Paramo will speak in London and it will be interesting to hear whether he continues the soft tone expressed by Nowotny this week. ECB has softened its tone considerably and we expect at least a 25bp rate cut in December, possibly combined with extending the fixed rate full allotment to 24 months.
FX markets: The euro continues to struggle and traders turned to the dollar yesterday as the debt crisis developed further ahead of Italy's t-bill auction today. EUR/USD has now finally lost the strong support previously seen at 1.34 and is this morning trading at a seven-week low of 1.33. The clear rejection of euro bonds by Merkel last night does not bode well for the euro going forward and with the US Thanksgiving holiday thin liquidity could easily push the cross lower today. Both NOK and SEK have a hard time performing in the current risk-off sentiment and with the risk of aggressive rate cuts in both Norway and Sweden in December and with potentially many long speculative NOK and SEK positions, the risk is still tilted to the upside for EUR/NOK and EUR/SEK the next couple of days despite the obvious strong fundamentals of these countries.
Scandi Daily
Denmark: The Danish central bank left rates unchanged yesterday afternoon despite the latest move lower in EUR/DKK. We continue to expect strong inflow into Denmark and downward pressure on EUR/DKK and we still forecast an independent Danish rate cut before Christmas. An additional rate cut on 8 December when the ECB is widely expected to cut rates is also an obvious possibility.
- No change in sentiment in the equity markets – the EU debt crisis continues as Merkel denounces euro bonds/stability bonds
- The euro remains under pressure against the dollar
- Hungary downgraded to junk-status by Moody’s.
The US equity and bond markets were closed yesterday for the Thanksgiving holiday.
The sentiment in the equity markets remains negative on the back of the comments from German chancellor Merkel regarding euro bonds. She again rejected the idea as a possible solution to the debt crisis and a stabilisation mechanism for the EU sovereign bond market. The Asian equity markets have followed the negative trend and most Asian indices are down this morning. Hang Seng has lost 1.3%, while Nikkei is one of the few indices that has gained this morning, up 0.3%.
Hungary lost its investment-grade rating at Moody’s yesterday as the Hungarian government is seeking IMF support to boost confidence in the EU’s most-indebted eastern member. Hungary was downgraded from Baa3 to Ba1: “The first driver of today’s downgrade is the uncertainty surrounding the Hungarian government’s ability to meet its targets on fiscal consolidation and public sector debt reduction,” Moody’s said in its statement. “Hungary’s recent requests for assistance from the IMF and the EU illustrate the funding challenges facing the country”.
In FX markets there have been small movement in major crosses. EUR remains under pressure against USD and JPY on the back of the EU crisis and is testing the 1.33-level against USD. EUR/SEK has moved above the 9.27-level in Asian trade this morning. The similar picture is found in NOK, which has been range-bound at the 7.85-level against the euro.
Global Daily
Focus today: With no important releases on the agenda today focus will remain on the developments in the European sovereign debt markets. ECB’s Gonzales-Paramo will speak in London and it will be interesting to hear whether he continues the soft tone expressed by Nowotny this week. ECB has softened its tone considerably and we expect at least a 25bp rate cut in December, possibly combined with extending the fixed rate full allotment to 24 months.
FX markets: The euro continues to struggle and traders turned to the dollar yesterday as the debt crisis developed further ahead of Italy's t-bill auction today. EUR/USD has now finally lost the strong support previously seen at 1.34 and is this morning trading at a seven-week low of 1.33. The clear rejection of euro bonds by Merkel last night does not bode well for the euro going forward and with the US Thanksgiving holiday thin liquidity could easily push the cross lower today. Both NOK and SEK have a hard time performing in the current risk-off sentiment and with the risk of aggressive rate cuts in both Norway and Sweden in December and with potentially many long speculative NOK and SEK positions, the risk is still tilted to the upside for EUR/NOK and EUR/SEK the next couple of days despite the obvious strong fundamentals of these countries.
Scandi Daily
Denmark: The Danish central bank left rates unchanged yesterday afternoon despite the latest move lower in EUR/DKK. We continue to expect strong inflow into Denmark and downward pressure on EUR/DKK and we still forecast an independent Danish rate cut before Christmas. An additional rate cut on 8 December when the ECB is widely expected to cut rates is also an obvious possibility.
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