httpvh://www.youtube.com/watch?v=epbqA-zxXXA

The euro dodged a bullet yesterday with the announcement that banks within the EU only required to roll EUR132bn from the year long liquidity scheme expiring today. Some had feared that we would see close to EUR300bn of the total EUR442bn being rolled but this proved to be misfounded. It does show that banks within the EU are finding it easier to raise money in the debt markets than previously thought.

The joy of this was tempered somewhat in the evening trading session as Moody’s issued a statement about Spain’s credit rating. The ratings agency, which had had its own credit rating put on a negative watch earlier in the day by competitor S&P, said it was considering a downgrade of Spain’s Aaa rating on the basis of weakness in the banking sector. Moody’s are the only one of the big 3 ratings agencies who haven’t reappraised Spain of late. It also comes a day before Spain tries to sell billions of euros in debt. This left markets with a bit of a taste in the mouth, a taste however that sums up the past quarter.

Q2 2010 has been a bit of a toughie to be honest. US stocks have had their first negative quarter since Q1 2009 and investors and businesses are starting to worry that the air is coming out of the recovery balloon a little. Q3 will be the determining factor and will tell us whether our hopes for a strong Christmas is warranted.

Overnight risk has received a little of a boost as the Japanese Tankan survey, a measure of business confidence in Japan, rallied to a 2 year high. This is a bit of a surprise really given the poor confidence figures everywhere else, the falls on the Nikkei and the persistent fears of continuing deflation in that part of the world. The bulls will however take what they can get.

The UK was meant to have GDP data yesterday but due to a ‘calculation error’ at the ONS this must now wait until July 12.

We do however have a day of news from the global manufacturing sectors with PMIs from the UK (09.30) and Europe (09.00) and the ISM (15.00) from the US. Most are expecting for a slight moderation in growth; something that will continue to kick risky assets lower.