-Rehn: Fiscal union only possible in long-term
-Members of EU Economic affairs committee chastised for leaks
-Moody´s cuts outlook on EU to negative from stable
-Dutch Socialists may favour granting ESM a banking license
-Spanish 3 year bond yields are falling by 40 basis points to 4.06%

FTSE-100: -0.80%
Dax-30: -0.31%
Cac-40: -0.58%
FTSE-Mibtel 30: 0.251%
Ibex 35: 1.38%
Stoxx 600: -0.45%

By midday the main European equity benchmarks are still trading on a mixed footing, with falls in most cases but large gains in some periphery markets, such as Madrid's Ibex 35. That following remarks attributed to European Central Bank President, Mario Draghi, to the effect that he may feel comfortable buying sovereign debt with a maturity of up to 3 years.

Hence the large falls we are now witnessing in periphery bond yields, in countries such as Italy and Spain. There is also some market commentary today regarding the sharp gains seen of late in Irish sovereign bonds.

Acting as a backdrop, credit ratings agency Moody's last night maintained the EU's 'Aaa' rating but lowered its outlook for the region from 'stable' to 'negative' to reflect "the negative outlooks now assigned to the Aaa sovereign ratings of key contributors to the EU budget: Germany, France, the UK and the Netherlands, which together account for around 45% of the EU's budget revenue".

Lufthansa hit by strikes

From a sector stand-point the weakest performance is now to be seen in the following industrial groups within the DJ Stoxx 600: automobiles (-1.70%), basic resources (-1.18%) and health care (-1.12%).

Deutsche Lufthansa has canceled flights from Berlin, Frankfurt and Munich because of strikes this morning.

Swiss data comes in well below estimates

Swiss gross domestic product contracted at a 0.1% quarter-on-quarter rate in the second quarter, below the 0.2% gain forecast.

Spanish unemployment rose by 38,200 in August, after the previous month´s 27,800 person fall.

Eurozone producer prices rose by 0.4% month-on-month in July (Consensus: 0.2%).

Slight retreat in the Euro and oil

The euro/dollar is now edging lower, by 0.12%, to the 1.2573 dollar mark.

Front month Brent crude futures are rising by 0.301 dollars to the 116.04 dollar mark on the ICE.

AB

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