EFSF credit rating at risk, German factory orders jump, RBA cuts rates

Standard & Poor's has warned that the European Financial Stability Facility may lose its AAA credit. Bloomberg reports:

“We could lower the long-term credit rating on EFSF by one or two notches if we were to lower the AAA sovereign ratings, which are currently on creditwatch, on one or more of EFSF’s guarantor members,” S&P said in a statement today.

Despite this threat, markets were mostly little changed on Tuesday. The STOXX Europe 600 fell 0.3 percent but the S&P 500 rose 0.1 percent, the latter boosted perhaps by reports that eurozone lenders are considering strengthening their bailout funds.

Meanwhile, third quarter GDP growth in the euro area was confirmed at 0.2 percent on Tuesday.

While eurozone growth is expected to weaken in the fourth quarter, the German economy appears to have entered the current quarter with surprising strength. Factory orders jumped 5.2 percent in October, the most in 19 months and well above expectations for a 1.0 percent increase.

Still, some central banks are not taking chances with the situation in Europe. The Reserve Bank of Australia lowered its benchmark interest rate by 25 basis points to 4.25 percent on Tuesday, its second consecutive cut. However, the Bank of Canada left its interest rate unchanged at 1.0 percent.