Whac a mole

European stocks sold off at 6am after Fitch downgraded Portugal’s credit rating to AA- from AA with a negative outlook. They said “a sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal’s creditworthiness.” Yields in Portugal are up about 3 bps and 5 yr CDS is wider by 7 bps to 140 bps. In contrast, Fitch has Greece at a BBB+ rating and Greek CDS is trading at 325 bps. Helped by a weaker euro, Germany’s IFO business confidence # was 2.3 pts above estimates at 98.1, the highest since June ’08. The euro though is at the lowest since May ’09 vs the $ as Germany and France edge Greece towards the IMF. According to II, newsletter writers are almost as bullish as they were on Jan 20th, the day after the Jan high as Bulls rose to 48.9 from 46.1 and Bears fell to 20.5 from 21.3. ABC confidence rose 1 pt to -44. The MBA said purchases rose 2.7% but refi’s fell 7.1%.

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