-Rajoy will not ask for a bail-out this weekend -EP
-Moody's sees Spanish banks' capital needs at between 70bn and 105bn euros
-10 year Spanish bond yields down by 14bp to 5.75%

FTSE-100: 0.25%
Dax-30: 0.40%
Cac-40: 0.22%
FTSE-Mibtel: 0.86%
Ibex 35: 1.26%

European equities had turned around by midday after an initial start lower. That following a mixed close -overnight- on Wall Street and reports that Germany is pressuring the Iberian nation to hold off on making a request for a bail-out. In a similar vein, Spanish press agency Europa Press cited the country's Prime Minister, Mariano Rajoy, as having said that he will not call for a rescue this weekend.

That comes at a moment when many market commentators seem to be of the opinion that Spain must ask for aid quickly if it wishes to retain access to capital markets. Be that as it may, there are those who warn that electoral calculations in both Germany and Spain are weighing heavily.

A rather negative report from ratings agency Moody's on Spain's financial system also seems to have failed to dent investor sentiment towards Spain.

According to Moody's Spanish banks may need between €70bn and €105bn to plug their capital gaps, well above the €59.3bn announced by private consultancy Oliver Wyman last Friday.

The main discrepancy between the findings of both reports resides in the level of so-called 'core capital' which lenders are expected to maintain under both adverse and highly-adverse scenarios. Whereas Spanish authorities argue that the minimum level of 6% would suffice -and be more logical so as to avoid reinforcing the negative cycle- Moody's assumed that levels of between 8% and 10% would be advisable.

Nevertheless, Moody's added that a recapitalization would still be "intrinsically credit positive [since it would involve more capital and more banks than earlier efforts]."

To be had in account, last night's somewhat unexpected interest rate decrease out of Australia may also be helping to buttress sentiment, coming as it did before this week's meetings of the UK's Monetary Policy Meeting (MPC) and the European Central bank's governing council.

From a sector stand-point, and on the corporate front, the best performance is now to be seen in the following industrial groups within the DJ Stoxx 600: Utilities (0.94%), Retail (0.85%) and Automobiles (0.51%).

Spanish unemployed rise above forecasts

Spanish unemployment rose by 79,600 in September (Consensus: 57,000).

Eurozone producer prices rose by 0.9% month-on-month in August (Consensus: 0.6%.

Other asset classes steady

The euro/dollar is now 0.20% higher at 1.2924.

Front month Brent crude futures are now falling by 0.232 dollars to the 111.93 dollar per barrel mark on the ICE.



AB

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