S&P downgrades Russia to Junk

Market movers today

• There's a number of tier-2 data on tap today. UK GDP for Q4 is expected to rise 0.6% q/q in line with consensus following an 0.7% q/q rise in Q3. It leaves the annual rise at 2.8%, a still solid pace of growth leading to a further tightening of the labour market.

• In the US durable goods orders have been soft in the past months pointing to slower capex expenditure in Q4 following strong activity in the summer and autumn months. Orders are expected to have rebounded a bit in December with core orders (nondefence ex aircraft) rising 0.9% m/m after the November drop of 0.5% m/m.

• US also releases preliminary Markit PMI for the service sector and the composite index. The service PMI has been quite weak towards the end of 2014 but is expected to have recovered slightly in January to 53.6 from 53.3.

• Finally US consumer confidence from Conference Board is released. We see clear upside risk and expect a rise to 97.0 (consensus 95.0) from 92.6. The index has been trailing the consumer survey from University of Michigan, which has moved sharply higher in the past months.

• In Sweden, reports on PPI and the trade balance for December are due. For more on Scandi markets see page 2.

Selected market news

It has been a relatively quiet session overnight. Risk appetite has improved and stock markets traded higher in the US last night. In Asia most regional indices are also higher this morning.

Last night the credit rating agency Standard &Poor's downgraded Russia to ‘junk’. According to the agency, the growth prospects for Russia have weakened and the outlook is ‘negative’. We expect the Russian economy to shrink 7.9% y/y in 2015 and 0.8% y/y in 2016, see Russian economy set to dive deep in 2015,19 December 2014. Before the downgrade the RUB had been under some pressure - losing 4% against the USD. The downgrade combined with the re-escalation of fighting in Ukraine and the likelihood of new sanctions and potential counter sanctions from Russia is likely to put further downward pressure on the Russian markets in the coming days.

In Greece it was confirmed yesterday that Syriza will form a government with the small right-wing party, Independent Greeks, and thus Alexis Tsipras, leader of Syriza, was sworn in as Greece’s new prime minister only one day after his party won a significant election victory. Together Syriza and Independent Greeks control a total of 162 seats in Greece’s 300-seat parliament but it is a remarkable coalition in the sense that the radical left-wing Syriza and the right-wing Independent Greeks have very little in common besides a strong opposition to Greece’s austerity measures that the former government negotiated with the EU and IMF.