ETX Capital Daily Market Bite, 25th February, 2013: Markets Firm Despite Moody’s UK Downgrade
February 25, 2013 1:49 pm
February 25th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
European financial markets are on the up Monday morning thanks to an upbeat session in Asia overnight where markets extended last week’s advance. Despite China’s HSBC PMIs showing a sharp deceleration [due to slowing global demand and the Lunar NY holiday], Asian markets were supported by Japan’s advance on speculation that the next BOJ governor will implement aggressive easing measures. Here in Europe, markets are tracking Asia’s strength despite Italian elections currently being underway and late Friday’s credit rating downgrade to the UK by Moody’s. The rating agency cut the UK’s triple-A rating by one notch to Aa1 with a stable outlook. The move was widely seen as flagged with agencies last year warning over the coalition government’s policies being ineffective. Traders are likely to shrug off the downgrade as it has been priced-in for some time and more importantly, does not fundamentally change the UK’s overall investment value. Most in the markets see it as a symbolic move that will likely heat up the political discussions over the UK’s damp economic growth prospects and spur the coalition government to launch bolder policies to drive growth. The timing of the move too is interesting as it comes ahead of the Chancellor’s March 20 UK Budget. Looking through to today’s agenda, economic data is thin on the ground with only UK BBA loans for house purchases worth noting. Much of the focus today will be on the Italian elections which are currently underway with an outcome expected by tomorrow latest. Ahead of the results, we are likely to see a degree of market volatility creep in with the peripheral bond market most responsive to headlines out of Italy.
February 25th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
European financial markets are on the up Monday morning thanks to an upbeat session in Asia overnight where markets extended last week’s advance. Despite China’s HSBC PMIs showing a sharp deceleration [due to slowing global demand and the Lunar NY holiday], Asian markets were supported by Japan’s advance on speculation that the next BOJ governor will implement aggressive easing measures. Here in Europe, markets are tracking Asia’s strength despite Italian elections currently being underway and late Friday’s credit rating downgrade to the UK by Moody’s. The rating agency cut the UK’s triple-A rating by one notch to Aa1 with a stable outlook. The move was widely seen as flagged with agencies last year warning over the coalition government’s policies being ineffective. Traders are likely to shrug off the downgrade as it has been priced-in for some time and more importantly, does not fundamentally change the UK’s overall investment value. Most in the markets see it as a symbolic move that will likely heat up the political discussions over the UK’s damp economic growth prospects and spur the coalition government to launch bolder policies to drive growth. The timing of the move too is interesting as it comes ahead of the Chancellor’s March 20 UK Budget. Looking through to today’s agenda, economic data is thin on the ground with only UK BBA loans for house purchases worth noting. Much of the focus today will be on the Italian elections which are currently underway with an outcome expected by tomorrow latest. Ahead of the results, we are likely to see a degree of market volatility creep in with the peripheral bond market most responsive to headlines out of Italy.
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