Few large financial institutions managed to escape unscathed as Moody's repositioned the ratings of 15 banks and securities firms with global capital markets operations after the closing bell on Thursday. Credit Suisse suffered the worst of the downgrades and saw its rating hacked by three notches, and although whispers before the release were that Morgan Stanley was also going to see its long-term debt rating moved three levels lower, it managed to escape with only a two-step downgrade. Canada's own RBC had its long-term rating cut to Aa3 from Aa1, as Moody's felt RBC's significant capital market operations, and the associated volatility that comes along with these activities, warranted a downgrade. However, having the lowest earning volatility amongst its global investment banking peer group earned RBC a stable outlook moving forward.

The key takeaway from Moody's action yesterday was the new obligations for additional collateral requirements that some of these financial institutions will now face, along with the potential for lost trading revenues for certain derivatives transactions. According to Credit Suisse's annual report issued at the end of last year, the firm may have to post additional collateral requirements of up to 4.5bln CHF in order cover outstanding derivatives trades with counterparties because of their three-notch downgrade.

Moving across the pond, bad economic releases from Germany this week continue to sour investor sentiment and show that the once-resilient German economy is losing momentum as austerity measures from within the common-currency bloc curb demand. With data from purchasing managers in the manufacturing industry showing that the industry remained in contractionary territory for a fourth straight month, Ifo Business Climate for the German economy missed economists expectations of 105.6 to come in with a print of 105.3 this morning. The drop to 105.3 from last month's decline to 106.9 is the lowest reading since March of 2010, and reiterates how the debt crisis is clouding the economic outlook moving forward. The EUR remained under pressure and looks set to continue its downward trajectory from yesterday, testing the waters just above 1.2525 against the USD before the announcement of easing ECB collateral requirements led to a sharp spike up to 1.2575. European equity indices are also retracing some of their losses midway through their session, although the Stoxx, FTSE, and DAX are still off 0.19%, 0.76%, and 0.69% respectively.