The major news this morning has been the downgrade of Italy's long-term credit rating by Standard & Poor's, a move that has added further worries to a financial market already preoccupied with the debt crisis in Greece. S&P cited weakening economic growth and rising borrowings as key factors likely to drag on Italy, the country with Europe's second largest debt burden. What is clear to everyone is that the problems in Italy have spawned from the turmoil in Greece, and investors are concerned that as long as the Greek saga drags on, the probability of more contagion increases. Talks between Greece and the troika (group consisting of EU, ECB and IMF representatives) have thus far been constructive according to the Greek Ministry of Finance, but markets will need to see something more substantial than this before the anxiety surrounding this event eases. Discussions are ongoing today, and a further conference call is scheduled this afternoon before any official communiqué is expected. In a bid to calm jittery markets that are vulnerable to rumours and speculation, the Greek government quickly came out this morning to refute suggestions that PM Papandreou was considering a referendum on Greece's EU membership. In other European news, this morning's final release of Swedish Q2 GDP was in line with expectations at 0.9% QoQ, slightly down from the prior reading of 1.0%. We also received the minutes of the latest Riksbank rate meeting, where it was revealed that the central bank is concerned Sweden's economic slowdown is more apparent than it had been in July. Deputy Governor Nyberg stated that the low levels of underlying inflation in the Swedish economy did not warrant any immediate action to raise interest rates (headline CPI in August was 0.0% MoM, 3.4% YoY), adding that developments and outcomes in the Eurozone will likely determine the length of pause in Swedish rates. As the discussions in Greece wind down, expect focus to turn to this week's FOMC rate meeting tomorrow. One of the key plans believed to be under consideration is operation twist whereby the Fed would start shifting its portfolio of government bonds from short-term securities to longer-term securities - thereby extending the maturity of its balance sheet and pushing down long-term interest rates. The risks for the Fed in its attempts to stimulate the economy through lower rates is clear; CPI hit 3.6% in July and is on an uncomfortable upward trajectory, and lower rates will only exacerbate this problem. Clearly however, the growth side of the Fed's mandate is demanding that something be done, so expect an interesting build-up to the meeting at 18:15 GMT tomorrow.