S&P Rating Services decided to reduce the U.S. long-term debt outlook from stable to negative. That decision and the rumors about the restructuring of the Greek debt caused a serious drop in the equity markets and the strengthening the dollar against the euro. The oil prices fell by 1,8% and the prices of gold set a new record.

Greece will restructure its debt

On Monday morning, the sentiment on European markets was negatively affected by the Greek press reports about a restructuring of the debt of Greece. This initiative is supposed to appear during a meeting of Economic and Financial Affairs Council in Hungary on 8 April.  However the Greek government  denied quickly these information. However, the prices of the Greek credit default swaps strongly rose and the euro currency began to fall against the dollar. The downward movement was also supported by the sentiment in the market connected with the cut of the U.S. debt outlook. At the end of the day EURUSD tested the 1.4227 level.

S&P cuts U.S. debt outlook

Yesterday's decision to lower the prospects for U.S. long-term rating at "triple A" to negative from stable strongly influenced the market sentiment. First of all, because that information was highly surprising. Although it takes place three months after the analysts of the agency, together with the representatives of Moody's Investors Services warned against the possibility of cutting U.S. credit rating because of the worsening fiscal situation, few people assumed that the U.S. credit rating, even with regard to the perspective, may change.

It seems unlikely that in the coming months, there will be another decision on the further cuts of the U.S. credit rating. However, the possibility of lowering the U.S. outlook by another agency is real. It can lead to the deepening of the fear in the financial markets, as well as resulting in growing possibility of the similar decisions on other European countries.

Earnings season

On Monday, after the session, Texas Instruments published its quarterly results. The company earned in the first quarter of 2011 666 million dollars (55 cents per share), compared to 658 million dollars (52 price per share) a year earlier. Revenues amounted to 3.39 billion dollars. Analysts forecasted that Texas Instruments will close the first quarter with the earnings of 58 cents per share and revenues of 3.4 billion dollars.

The company also announced a profit forecast for the second quarter of this year. It expects that earnings per share will be within the range of 52 - 60 cents and revenues of 3,41-3,69 billion dollars. The market consensus amounts to 63 cents per share and 3.53 billion dollars. During the after-hours session Texas Instruments shares fell by 1,6%.

Events to watch

Today BNY Mellon, Goldman Sachs, Intel, Johnson & Johnson, Seagate, Yahoo will publish the quarterly reports. Tuesday  is also rich in macroeconomic publications: Preliminary values ​​of indexes PMI for Germany and the Eurozone, the balance of payments data for the Eurozone, data on CPI inflation in Canada, U.S. reports from the real estate market.        

Pawel Kordala

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