European stocks are set to open lower on Thursday, taking cues from Asian markets as a downgrade of Spain's sovereign credit rating by Moody's and weak U.S. retail sales data added to the gloom over the global economy. However, the euro remains firm against the dollar and yen, lifting commodities such as crude and copper slightly higher.
In yet another blow to Europe's efforts to contain the deepening debt crisis, Moody's Investors Service yesterday downgraded two euro area members, Spain and Cyprus, and placed their bond ratings on review for further possible downgrade.
Spanish government bond rating was lowered by three notches to 'Baa3' from 'A3,' reflecting increasing concerns that the government's decision to seek EUR100 billion financial support from EU will further increase the nation's debt burden. Cyprus's government bond ratings were cut by two notches to 'Ba3' from 'Ba1.'
Asian markets are trading modestly lower, as caution set in ahead of the second round of Greek elections which will take place this weekend. Also, Italy will hold another key bond auction today, with the government aiming to raise between EUR 4 billion and EUR 6 billion by selling medium and longer-term bonds.
In other economic news, the International Monetary Fund has approved the disbursement of EUR 1.4 billion loan installment to Ireland, citing steadfast implementation of the deficit reduction program as recommended by the troika. The loan is part of EUR 85 billion financing package approved by the European Union and the IMF in December 2010.
In corporate news, German airport services company Fraport said it welcomed about 5.1 million passengers at its Frankfurt Airport global hub in May 2012, up 1.4 percent from a year earlier.
Kabel Deutschland Holding AG reported fourth-quarter net profit attributable to equity holders of the parent of 59.52 million euros compared to a loss of 0.15 million euros last year.
Mexican telecommunications company América Móvil, S.A.B. de C.V.said it has increased its stake in Dutch telecommunications company Royal KPN N.V. to 8.12 percent.
Professional services group Management Consulting Group Plc issued a cautious outlook for the remainder of the year, citing the uncertain macro-economic environment.
European stocks finished on a mixed note on Wednesday, as rising borrowing costs in Spain, Italy and even in Germany on contagion worries coupled with weak eurozone industrial output as well as U.S. retail sales data dampened investor mood.
The Euro Stoxx 50 index of eurozone bluechip stocks and the Stoxx Europe 50 index, which includes some major U.K. companies ended largely unchanged, the German DAX slipped 0.1 percent and France's CAC 40 shed 0.6 percent, while the FTSE 100 of the U.K. rose 0.2 percent and Switzerland's SMI added 0.4 percent.
On Wall Street, shares showed a lack of direction before coming under considerable selling pressure in the latter part of the session overnight. Italy's borrowing costs rose sharply at a bond auction and data showed U.S. retail sales fell for the second month in a row in May on the back of sharp drop in gas prices, resulting in volatile trading.
Risk sentiment weakened further following news that credit rating agency Egan-Jones downgraded Spain's sovereign rating to 'CCC+' from 'B', its fourth rating downgrade in the past six weeks. The Dow slid 0.6 percent, the tech-heavy Nasdaq shed 0.9 percent and the S&P 500 dropped 0.7 percent.
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