HUNGARY: Moody’s Cuts Budapest’s Credit Rating, Warns of Year-End Default Risk
- Moody’s Ratings downgraded the City of Budapest's long-term issuer ratings to Ba1 from Baa3 and placed them on review for further downgrade, citing weakened liquidity, uncertainty over government transfers, and ongoing disputes with the central government. Specifically, it noted that failure to repay a HUF 40bn overdraft by Dec 31 could trigger cross-default clauses.
- Moody’s said the liquidity crisis is linked to delayed government transfers and ongoing disputes, including on municipal taxes and public transport funding. However, the capital’s debt levels are said to be moderate and declining.
- In a post on social media, Mayor Gergely Karacsony blamed the government for taking in more money from the capital while blocking the city from getting new borrowing. Previously, the opposition leadership has blamed the government’s tax policies for pushing the capital city to the brink of insolvency.
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UK FISCAL: Reeves reported for possible "market abuse," ministerial code breach
- As expected, the weekend's fiscal headlines reacted to the aftermath of the Budget. The biggest stories were surrounding whether Chancellor Rachel Reeves mis-led the public and financial markets by misrepresenting how much worse the OBR forecasts had made the headroom and how the income tax plans had been changed by updated OBR forecasts that weren't so good.
- Indeed, she has since been reported to the FCA by Shadow Chancellor Mel Stride of the Conservatives for "possible market abuse". She has also been reported by Reform UK leader Nigel Farage to Sir Magnus Laurie, the PM's Independent Adviser on Ministers' Interests, regarding a potential breach of the ministerial code.
- We noted in the run up to the Budget, the stories regarding an improvement in the OBR forecasts leading to the income tax plans being dropped did not stack up with "pre-measures" (i.e. pre-policy) forecasts that would have been finalised in late October. This timeline has since been confirmed by the OBR.
- From a political point of view, this will be challenging for Reeves. The main news coverage is more on this issue and the delayed tax rises to fund welfare than covering the cuts to energy bills and freezing rail fares.
BRENT TECHS: (G6) Continues To Trade Below Resistance
- RES 4: $70.86 - 76.4% retracement of the Jun 23 - Oct 17 bear leg
- RES 3: $70.33 - High Jul 30
- RES 2: $68.86 - High Sep 26 and a key resistance
- RES 1: $65.25 - High Oct 24
- PRICE: $63.46 @ 07:07 GMT Dec 1
- SUP 1: $59.93 - Low Nov 20 and the bear trigger
- SUP 2: $58.92 - Low May 5
- SUP 3: $58.11 - Low Apr 9 and a key support
- SUP 4: $56.22 - 2.00 proj of the Jul 30 - Aug 13 - Sep 26 price swing
The move down in Brent futures since Nov 11, highlights a bearish theme. A stronger resumption of weakness would expose key support and bear trigger at $59.93, Oct 20 low. Clearance of this level would confirm a continuation of the bear cycle. Note, it is still possible that a bullish corrective cycle is in play. The contract has recovered from its recent lows, a move above $65.25, the Oct 24 high, is required to signal scope for a stronger recovery.
BTP TECHS: (Z5) Trend Signals Remain Bullish
- RES 4: 123.14 1.764 proj of the Sep 3 - 11 - 25 price swing
- RES 3: 122.81 1.618 proj of the Sep 3 - 11 - 25 price swing
- RES 2: 122.53 1.500 proj of the Sep 3 - 11 - 25 price swing
- RES 1: 121.70/94 High Nov 13 / High Oct 17 / 22 and the bull trigger
- PRICE: 121.37 @ Close Nov 28
- SUP 1: 120.48 Low Nov 20 and key short-term support
- SUP 2: 120.15 50.0% retracement of the Sep 3 - Oct 17 bull leg
- SUP 3: 119.73 61.8% retracement of the Sep 3 - Oct 17 bull leg
- SUP 4: 119.07 Low Sep 25
The trend set-up in BTP futures is bullish. A strong rally last week reinforces a bull theme. Note that the moving average studies are in a bull-mode position, highlighting a dominant uptrend. A continuation higher would expose the bull trigger at 121.94, the Oct 17 and 22 high. Key short-term support has been defined at 120.48, the Nov 20 low. A clear breach of this level would resume the recent bear leg.
