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While you were sleeping: Rating cuts for Christmas

While you were sleeping: Rating cuts for Christmas

(BusinessDesk) December 21 - As Europe battles with a harsh blast of Arctic cold, coal would perhaps be a more appropriate stock stuffer heading toward Christmas eve but rating companies aren’t being that generous.

The euro dropped overnight after Moody’s Investors Service downgraded some Irish lenders and debt securities, days after slashing Ireland’s sovereign credit rating by five notches. Moody’s also said it might cut the ratings of some Spanish banks.

There was even speculation that France’s national rating may be next as investors continue to reposition for more bad fiscal news.

The euro fell to a two-week low - dropping 0.5% to US$1.3114 - against the U.S. dollar and a record low to the Swiss franc and more losses were forecast.

"Officials' inability to get ahead of the curve in dealing with the continent's debt crisis remains a key liability for the euro, and likely one that will keep it vulnerable well into 2011," Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, told Reuters.

The next downside target for the single currency is US$1.30, followed by the December low of US$1.2970, traders told Reuters.

The greenback rose against a basket of major currencies, with the U.S. Dollar Index advancing 0.35% to 80.655.

It wasn’t all bad news. Tensions eased somewhat when North Korea said it would not react to "reckless" military drills by the South despite an earlier threat to retaliate, and CNN reported that Pyongyang had agreed to the return of nuclear inspectors.

Investors though remained skittish and fled to the perceived safety of fixed-income securities, buying U.S. Treasuries.

Also supporting U.S. Treasuries were expectations that the Federal Reserve might buy the biggest amount of U.S. debt in a single day under the new round of quantitative easing.

The Fed today bought US$7.79 billion of Treasuries due from February 2018 to August 2020, Bloomberg News reported, citing the New York Fed’s

Starting at 1.15pm and ending at 2pm, the Fed will purchase Treasury notes maturing from December 2014 to May 2016. The central bank will buy from US$6 billion to US$8 billion of Treasuries in this maturity range.

The amount purchased may be the largest since the Fed restarted the program after completing US$1.7 trillion in debt purchases in March. The central bank will buy as much as US$11 billion of debt in a pair of operations tomorrow and US$2.5 billion on December 22.

Stocks on Wall Street were mixed.

Boeing Co dropped after a U.S. newspaper said the the world’s largest aerospace company might again delay its 787 Dreamliner.

Stocks gained in Europe. The benchmark Stoxx Europe 600 Index climbed 0.7% to 278.38, the highest level since Sept. 12, 2008, the last trading day before Lehman’s collapse.

Oil fell. U.S. crude for January delivery fell 60 cents to US$87.42 a barrel by 1531 GMT. The January contract expires at the end of trading on Monday. ICE Brent for February fell 45 cents to US$91.21.

"We expect the oil market to continue with its sideways drift toward year-end, albeit with some weakness likely to emerge in January," James Zhang from Standard Bank told Reuters.

"We continue to view the European debt crisis with caution, while a potential policy response to rising inflation in China could also trigger a negative reaction," he said.

Spot gold was last up 0.5% at US$1,379.59 an ounce by 1447 GMT, having touched an intraday high of US$1,388.05 earlier. U.S. gold futures for February rose 70 cents an ounce to US$1,379.90 an ounce.

As for the price of coal, it’s soaring. The price of coal from South Africa’s Richards Bay is at a more than two year high.


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