Financial markets eased a tad in European session amid the news that Moody's is going to downgrade 17 global and 114 European financial institutions. In a statement issuing such warning, the rating agency said that capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions'. Some famous names including UBS, Credit Suisse and Morgan Stanley will be cut by as much as three notches. This added to worries that discussion of the Greek bailout package deal was once again delayed.
In the midst of global economic uncertainty, geopolitical tensions over Iran escalated. The Middle East nuclear power proclaimed advances in nuclear know-how, including the 4th generation of centrifuges which would be able to refine uranium 3 times faster. President Mahmoud Ahmadinejad said that the era of bullying nations has passed. The arrogant powers cannot monopolize nuclear technology. They tried to prevent us by issuing sanctions and resolutions but failed'. A report saying that Iran has cut off oil exports to 6 EU states has sent oil prices higher yesterday. Yet, the rumor was denied by Iran's oil ministry.
Both China's Premier Wen Jiabao and the PBOC Governor pledged to expand investment and to assist resolving the sovereign debt crisis in the Eurozone. While the actual amount to be committed to European government bonds is not confirmed, the latest data showed that China has reduced its holdings of the US Treasure to US$ 1.11 trillion in December, down US$ 31.9B from the prior month. This is probably a step of China's diversification from the greenback to other currencies, including the euro. Separately, China is increasing its gold purchases as global central bankers engage in quantitative easing which aims to depreciate fiat currencies. The World Gold Council stated in a report that demand for gold in China surged +20% to 769.8 metric tons in 2011, compared with a -7% drop in India to 933.4 metric tons. The Council anticipated that demand in China may surpass that of India this year.
On the macro front, the US initial jobless claims probably climbed +6K to 364K in the week ended February 11. Housing starts might have gained +1.98% to 670K and building permits rose slightly to 680K in January. Philly Fed Survey probably climbed to 8.4 in February from 7.3 a month ago.