Mixed Sentiments Dominate, as S&P Warns Europe of Possible Debt Downgrade in Cautious Trading

Mixed feelings dominated financial markets on Tuesday amid the lack of economic data from the United States, as fears continued to dominate global financial markets over the outlook of the European debt crisis after rating agency Standard & Poor’s announced it could downgrade the credit rating of 15 euro zone countries including Germany and France. Standard & Poor’s also signaled it could downgrade the credit rating of the European Financial Stability Facility EFSF.

Nonetheless, better than expected factory orders from Germany provided some hope for investors, where factory orders increased by 5.2% in October, better than median estimates of 1.0%, while compared with a year earlier, factory orders increased by 5.4%, also better than median estimates of 1.9%. Moreover, GDP data from the euro zone for the third quarter came in line with median estimates.

Meanwhile, the Bank of Canada left the benchmark interest rates unchanged at 1.00% in line with median estimates, where the BOC signaled that the European debt crisis could weigh down on global economic growth. Nonetheless, the BOC signaled that rising economic activities in the United States represent a good sign for the outlook, since the United States is indeed Canada’s largest trading partner. Canada also released the Ivey PMI for November, which rose to 59.9, better than median estimates of 55.5.

The U.S. dollar fell slightly against a basket of major currencies on Tuesday, where the U.S. dollar index was trading at 78.62, compared with the opening level at 78.71. The Euro was little changed against the Dollar, where the EUR/USD pair traded at $1.3383, compared with the opening level at $1.3386, the British Pound also fell against the Dollar, where the GBP/USD pair traded around $1.5601, compared with the opening level at $1.5642, and the U.S. dollar fell slightly against the Japanese Yen, where the USD/JPY pair was trading around 77.75, compared with the opening level at 77.80.

Stocks in the United States were mixed by opening on Tuesday, as the Dow Jones Industrial Average was up by nearly 0.25% to trade around 12,129, while the S&P 500 index was down by nearly 0.05% to trade around 1256. European stock indexes were also mixed before closing on Tuesday, where FTSE 100 was higher by nearly 0.20% to trade at 5579 and the DAX was down by nearly 1% to close around 6043.

Gold prices remained under pressure and dropped to trade now around $1709 an ounce and crude oil prices were little changed to trade around $100 a barrel.

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