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Current Futures: Dow -4.00, S&P -0.50, NASDAQ +0.75

European markets are trading mixed, after the major indexes in Asia and the U.S. closed in the red. U.S. futures are trading barely below the breakeven line, erasing some small gains posted earlier.

It appears the financial markets and more especially the equity markets are still absorbing the downgrade of the U.K. economy. Even though the U.K. has retained its top-notch triple-A rating, the outlook lies to the downside, meaning that if the government fails to reduce spending, the U.K. rating will probably be cut. According to S&P, there are 1 in 3 chances for the U.K. to lose the triple-A rating. Consequently, equities have suffered over the last 24 hours of trading, as other major economies will probably have to face a similar situation.
During the Asian session, the Bank of Japan released its new monetary statement. As it was expected, the bank said the economy would stabilize in the second part of 2009, while gradually returning to growth by 2010. However, the bank still looks unable to anchor inflation expectations, something that the BoJ has failed to do for more than a decade. According to the bank’s forecast, the CPI will continue sliding into negative territory even after the economy bottoms. 

As such, the Bank of Japan expanded its accepted collateral to also include bonds issued by the U.S., U.K., Germany and the French governments. TheLFB-Forex.com Trade Team notes that, the BoJ tries to inject as much money and liquidity as it can in the financial system, to raise the inflation outlook. However, tonight’s decision, to include foreign denominated bonds as collateral might have only a minor effect, since the amount of such assets held by Japanese banks is relatively small.

Overnight, the Japanese Nikkei declined 38.34 points (0.41%) to 9,225.81. The Australian S&P/Asx fell 52.30 points (1.37%) to 3,761.60. The U.K. Ftse added 2.57 points (0.06) to 4,348.05, while the German Dax shed 8.40 points (0.17%) to 4,892.27

Crude oil for June delivery was recently trading at $61.60 per barrel, higher by $0.50.

Gold for June delivery was recently trading higher by $3.40 to $954.10.

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