Risk assets were out of favour today after several days of gains, following Fitch’s three notch cut of Spanish government debt, from A to BBB, only two notches above junk status. It came as four EU officials suggested that the finance ministers of the 17 member eurozone would hold a conference call on Saturday to discuss requests from Spain for an aid package. The Spanish government said it had no comments to make on the report. Risk appetite was also dampened following Ben Bernanke’s testimony on Capitol Hill yesterday, during which he failed to mention the further quantitative easing that markets hoped for. It was perhaps unsurprising that traders and investors were apprehensive of keeping long positions open over the weekend, given the run up in prices over the last few days and the uncertainty surrounding the Spanish situation.There is also key economic data out of China this weekend, with many suggesting the interest rate cut earlier this week is suggestive of poor data ahead.
A strengthening dollar ensured commodities were under pressure with sentiment also dented by US trade data that showed the country’s balance of trade was worse than expected. This also affected mining companies, with those of the UK leading the market lower.
The FTSE 100 finished 12 points (0.23%) lower, although recovered from the lows of the day which were experienced in the morning. Rather surprisingly, the Spanish market was one of the few in Europe that finished the day higher. Brent crude finished the day down nearly 3% at $97.8/bbl.