Trader Talk

Another Nightmare: EU Bailout Fund Credit Rating May Be Cut

Another nightmare: Standard & Poor's says the European Financial Stability Facility (EFSF)rating may be cut, placing long-term rating on negative watch.

The S&P placing 15 of 17 euro zone countries on watch for a possible downgrade created another anxiety: How the EFSF will maintain a AAA rating. If it can't, it's funding costs will be considerably higher. S&P says it will conclude its review as soon as possible after the summit.

Treasury Secretary Timothy Geithner arrives in Germany...meeting with European Central Bank (ECB) Chief Mario Draghi in Frankfurt, then will meet with German Finance Minister Wolfgang Schaeuble, and other euro officials leading up to the European Union summit.

The ECB will be meeting on Thursday, ahead of the EU Summit: Expect another rate cut. Comments from Draghi will be critical. Key issue: Will he agree to ramp up the Securities Markets Programme bond-buying operations?

We will be getting speeches on economic reform from Italy's Mario Monti and Spain's Rajoy on Dec. 5 and 8, respectively. Tomorrow, the Greek parliament will vote on its 2012 austerity budget.

Bottom line: There is a sense of movement. Euro zone interest rates are dropping: 10-year Italian debt is down to 6.25 percent, down 15 basis points overnight. Spain is of 8 basis points, at 5.12 percent.


1. German factory orders increased 5.2 percent in October, higher than a one percent gain expected.

2. What's up with China? The Shanghai Index was down for the third straight day and near the lowest levels since mid-2009. Nomura cut is estimate for China growth in 2012 to 7.9 percent from 8.6 percent.

3. Who got the phone call? Traders this morning were fuming that the Financial Times seemed to have had the story on S&P and the euro zone at 1:30 p.m., more than an hour before anyone else. Huh? Remember how the rumors of the S&P downgrade of U.S. debt surfaced in the morning of Aug. 5, hours before S&P actually pulled the trigger? _____________________________
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