- EU and IMF willing to give Portugal more leeway-Reuters
- Fitch downgrades Italy by one notch to BBB+
- Spanish and Italian risk premiums converge
- Oil down on Saudi production and dollar strength

FTSE-100: 0.19%
Dax-30: -0.16%
Cac-40: -0.32%
FTSE Mibtel 30: -0.82%
Ibex 35: -1.13%
Stoxx 600: -0.34%

European stocks were still trading with modest losses by midday, albeit larger ones in the Eurozone periphery. That came after news that ratings agency Fitch last Friday - just before the close of equity markets - lowered its rating on Italy´s sovereign debt by one notch, to BBB+ (with a negative outlook).

According to Fitch, "The inconclusive results of the Italian parliamentary elections on February 24-25th make it unlikely that a stable new government can be formed in the next few weeks. The increased political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amidst the deep recession."

While much market commentary highlighted that this action merely brings Fitch 'in-line' with the views of its peers it seems to have done little to help sentiment.

The above also came ahead of this week´s European Council summit, where leaders were expected to discuss possible solutions to the still festering financial crisis in Cyprus and a partial postponement of some countries´ budget deficit reduction targets.

Acting as a backdrop, Der Spiegel wrote of the creation by academics of a new Euro-sceptic party in Germany.

Meanwhile, and in Spain, over the weekend newspaper El País reported on the falling popularity of the single currency.

On a more upbeat note German Finance Minister Wolfgang Schaeuble told Austria´s Der Staandard that a British exit from the euro would be a catastrophe.

As well, Reuters cited sources as indicating that the European Union and International Monetary Fund are willing to give Portugal extra time to meet its budget deficit targets.

From a sector stand-point the worst performance was to be seen in the following sectors: Banks (-1.06%) and Real estate (-0.81%)



The contraction of Portugal´s economy at a 1.8% quarter-on-quarter rate in the fourth quarter of 2012 was confirmed on Monday morning.

Italy´s economy shrank at a 0.9% quarterly pace, data from ISTAT revealed.

French industrial production fell by 1.2% month-on-month in January (Consensus: -0.2%).

Germany´s trade surplus fell to €13.7bn in January (Consensus: €13.9bn).

Single currency stuck towards 1.30

The euro/dollar was off by -0.01%, to 1.3010, with some market commentary highlighting the recent rise in ´short´ positions against the single currency.

Front month Brent crude futures were down by 0.562 dollars to the 110.23 dollar mark on the ICE.

AB

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