Weak economic data, Moody's downgrade drag global mkts down

**Risk aversion was led by weak economic data and Moody’s downgrade on Thursday

Rating agency Moody’s downgraded 15 biggest global banks by 1-3 notches post US closing.

Goldman, JP Morgan, Citi, Morgan Stanley, Credit Suisse, UBS, HSBC, RBS, Bank of America, Societe Generale, Nomura, Macquarie saw a cut.

Market was aware of the impending rating action; US KBW bank index went down 2.3% ahead of the downgrade.

All US economic data came in weaker than expected, particularly manufacturing related readings.

Philadelphia Fed Index fell to -16.6 in June versus -5.8 month-on-month while consensus expected at +0.5

Markit said June US Flash manufacturing Purchasing Managers Index dropped to 52.9 from 54 in May (a new reading parallel to ISM)

Existing home sales for May came in at 4.55 million, down 1.5% MoM, which was weaker than expectations

Initial jobless claims stood at 3,87,000 as against consensus estimate of 3,83,000

Goldman Sachs recommended a tactical short on S&P 500 with 5% downside post economic data

Manufacturing PMI in Europe too was disappointing following the weak China reading, which pressurized commodities. 

Eurozone Manufacturing PMI for June fell to 44.8 from 45.1 MoM that was led by Germany PMI at 44.7 versus 45.2 MoM.

US-based consultants Oliver Wyman and Germany's Roland Berger released the anticipated report on Spain bank recapitalisation.

Both reports suggested that Spain banks need between euro 51 - 62 billion, which was better than the euro 100 billion provision by European Union

Talks of EFSF use to buy periphery bonds continue; EU state of heads meeting will be held today

Germany, France, Italy and Spain will meet in Rome at 1200 GMT; there will be joint news conference post meet

Market will be watching for statements on bank recapitalisation, fiscal and banking union and EFSF/ ESM use. 

US markets at close: Dow Jones dropped 2% to 12,573.6 and S&P 500 Index tanked 2.2% to 1,325.5. Nasdaq Composite was down 2.4%

European markets at close: DAX, FTSE and CAC were down 0.4-1%.

Asia today

Kospi tumbled 2%

Hang Seng and Taiwan Weighted fell over 1%

Straits Times was down 0.8% and Nikkei declined 0.5%

Chinese Shanghai is shut today

SGX Nifty slipped 1.1% to 5,119

Currencies

Successful Italian and Spanish auctions lowered borrowing costs

Spain 10-year bond yield was down to 6.5% now while Italy at 5.7%, but both failed to cheer Euro much on risk aversion.

Euro hit a low of 1.252 as against the US dollar yesterday, before closing down 1.3% at 1.254.

Dollar index was well above 82.

Commodities

WTI crude tanked 4% post economic data to well below USD 80 a barrel - lowest level since October 2011

Brent crude settled below USD 90 a barrel yesterday - Lowest since December 2010 

WTI crude is currently at USD 78.5 a barrel while Brent crude at USD 89.6 a barrel, rising 0.4% today morning 

Sharp cuts were seen in precious metals; Silver crashed 5.5% on weak manufacturing data

Gold was down 3% to USD 1566 an ounce as against USD 1600 plus yesterday, which was the worst one-day fall since late February

LME Copper was down 2.7% to below USD 7350 an ounce

What to watch out for

German IFO Biz climate

US API monthly report