Rating Agencies Dissatisfied with the EU Summit Outcome - 13.12.2011

European stock markets remain under pressure after international credit rating agencies said the European leaders made little progress to improve confidence. German DAX index dived 3.4%, while French CAC 40 lost 2.6% yesterday. US stocks were also affected, but declines were not so strong – S&P 500 dropped 1.5%. Finally Asian stocks traded today in the negative territory as well – Japanese Nikkei Average was 1.2% lower at the end of the session. Euro The euro depreciated to the lowest level since October 4 against the dollar (1.3160) having lost more than 200 basis points yesterday as Moody's Investors Service confirmed in an announcement its intention to “revisit the ratings of all EU sovereigns during the first quarter of 2012” due to the “continued absence of decisive policy measures” and because “the system remains prone to further shocks.” Fitch Ratings stated in its turn that a “comprehensive solution” to the current crisis is not on offer and predicted “a significant economic downturn across the region.” In Asian trading hours the single currency managed to recover slightly, but the upward potential was limited at 1.32 as data today may show German investor confidence slid to a three-year low. The ZEW Center for European Economic Research is predicted to report that the index of German investor and analyst expectations dropped further in December after declining to minus 55.2 in the previous month, the lowest since October 2008. US Dollar The greenback on the other hand is widely supported. The US currency strengthened against all its major counterparts yesterday while the dollar index touched its highest level since November 25 – 79.64. As the latest data have shown the US economy is outperforming expectations and the November retail sales report today may confirm the growth pace is accelerating. The Federal Reserve Open Market Committee will announce its policy interest rate decision today as well. The federal funds target is expected to stay at 0.25%.