On the UK and Europe, S&P says:

We view EU membership as key to longer term fiscal and growth outcomes in the U.K., given that the EU has traditionally been the destination for more than 45% of the U.K.’s net exports of financial services. We believe that, if the U.K. were to leave the EU, the U.K.’s economic prospects would weaken.

S&P’s reasons for keeping its rating on the UK:

The affirmation reflects our opinion that the U.K. continues to exhibit high labor- and product-market flexibility, and a wealthy and diversified economy.

We view the U.K.’s monetary flexibility as a key credit strength. It enables wages and prices to adjust rapidly, relative to trading partners. This boosts the economy’s resilience and competitiveness without generating deflationary pressures. The U.K.’s monetary authorities have drawn on the flexibility afforded by a reserve currency and this has benefited public debt sustainability, in our view.

We expect the U.K. economy to expand by more than 3.0% this year and 2.7% in 2015, as domestic demand benefits from further job creation and private-sector wage growth gradually returns. Our base case is that labor productivity growth (after adjusting for the long-term decline in North Sea output) will gradually recover as the business cycle gains traction and investment expands. Nevertheless, low interest rates and de-risking in the financial services sector (the output of which is indirectly measured via interest margins) will preclude financial-sector productivity fully returning to pre-crisis levels over the 2014-2017 forecast horizon, in our view. U.K. financial and insurance services make up roughly 9% of 2013 GDP.

Financial sector conditions also affect the U.K.’s balance of payments. The most important contributor to the deterioration in the U.K.’s current account balance--to 4.2% of GDP (2013 outcome) currently from 2.0% pre-crisis (1998-2007 average)--is the shift in the incomes component of the current account deficit. It has gone from a pre-crisis surplus (1.2% of GDP in 1998-2007) to a deficit of 0.8% of GDP in 2013.

Recent revisions to the U.K.’s national accounts indicate that the 2008-2009 recession was less severe than previously thought. As a consequence, annual average 2008-2012 GDP growth was revised 0.5 percentage points higher, reflecting primarily upward revisions to investment. At end-September 2014, national accounts revisions also led to an upward adjustment in nominal GDP by just over 6% for 2013. This revision has led us to lower our estimate of 2014 net general government debt by 2.8 percentage points to 82% of GDP, from 85%. In accordance with ESA2010 treatment, we have included just under 2% of GDP of Network Rail debt in our estimate of general government debt. Historically, we have always classified the Treasury’s Lloyds and Royal Bank of Scotland share purchases as illiquid assets (until these are sold); hence, the introduction of ESA2010 did not affect our estimates of the Treasury’s liquid general government assets.

The full report is here.

Here are the Reuters snaps on the S&P report on the UK’s rating:

• 12-Dec-2014 17:10 - S&P SAYS RATINGS ON THE UNITED KINGDOM AFFIRMED AT ‘AAA/A-1+’; OUTLOOK STABLE
• 12-Dec-2014 17:11 - S&P SAYS ALSO AFFIRMED ‘AAA/A-1+’ LONG- AND SHORT-TERM ISSUER CREDIT RATINGS OF BANK OF ENGLAND
• 12-Dec-2014 17:11 - S&P SAYS ALSO AFFIRMED THE ‘AAA/A-1+’ RATINGS ON THE DEBT PROGRAM OF NETWORK RAIL INFRASTRUCTURE FINANCE PLC
• 12-Dec-2014 17:12 - S&P SAYS AFFIRMATION REFLECTS OPINION U.K. CONTINUES TO EXHIBIT HIGH LABOR- AND PRODUCT-MARKET FLEXIBILITY, AND A WEALTHY AND DIVERSIFIED ECONOMY
• 12-Dec-2014 17:12 - S&P SAYS EXPECT THE U.K. ECONOMY TO EXPAND BY MORE THAN 3.0% THIS YEAR AND 2.7% IN 2015
• 12-Dec-2014 17:13 - S&P SAYS BELIEVE U.K.’S GENERAL GOVERNMENT DEFICIT WILL DECLINE MORE SLOWLY THAN OFFICIAL PROJECTIONS, TO 5.4% OF GDP IN CALENDAR-YEAR 2014
• 12-Dec-2014 17:14 - S&P SAYS STABLE OUTLOOK ON U.K. REFLECTS OPINION THAT THERE IS A LESS THAN ONE-IN-THREE PROBABILITY OF A DOWNGRADE OVER THE NEXT TWO YEARS
• 12-Dec-2014 17:16 - S&P SAYS BELIEVE THAT, IF THE U.K. WERE TO LEAVE THE EU, THE U.K.’S ECONOMIC PROSPECTS WOULD WEAKEN

Back with Greece, and the EU seems to be adding further fuel to the fire following Jean Claude Juncker’s statements earlier. It has released the programme of EU finance minister Pierre Moscovici’s two-day visit to Greece but this does not include meeting with opposition party Syriza, currently ahead in the polls, writes Helena Smith.

Controversy over the policy of freezing Syriza out is likely to build over the weekend. Juncker’s spokesman, Margaritis Schinas, ironically a Greek national, announced today that the EU commission president’s earlier statements - in which he appeared to be urging people not to elect Syriza - could be interpreted in a multiple of ways. “There are many ways of interpreting what he may mean,” he said.

The Greek prime minister Antonis Samaras, who will chair meetings at the finance, administrative reform and development ministries on Monday morning, will meet Moscovici later that day.

Falling oil prices may be causing concern in the stock markets, as a sign of weaker global demand, but they have helped boost US consumer confidence.

The preliminary reading of the Thomson Reuters/University of Michigan consumer sentiment index for December came in at a near eight year high of 93.8. Apart from falling fuel costs, consumers were also buoyed by improved prospects for jobs and wages.

This latest reading, the highest since January 2007, was better than the expected level of 89.5 and up from November’s final reading of 88.8.

Survey director Richard Curtin said:

Expected wage gains rose to their highest level since 2008, and consumers voiced the most favourable buying attitudes in several decades.

The news has helped pull markets up from their lowest levels, with the Dow Jones Industrial Average now down 39 points.

Wall Street has opened, and after an overnight rise on the Dow Jones Industrial Average, the US market has followed the rest of the world into the red.

The Dow is currently 85 points or 0.48% lower while the S&P 500 is down 0.41%, which would end the latter’s seven week winning streak.

US producer prices fell 0.2% last month, sharper than expected 0.1% decline in the wake of the recent plunge in oil prices.

But the core measure, excluding food, energy and trade services, was flat. Year on year the core index was up just 1.5%, showing weak inflationary pressures which could cause difficulties for the US Federal Reserve in its debate over when to raise interest rates. The Fed’s latest meeting takes place next week, and the key sentence about keeping borrowing costs low for a “considerable time” will be widely watched for any variation.

Riot police and protestors have clashed in Milan, during the anti-austerity protests marking today’s general strike:

Muscovites get a daily reminder of the slump in the rouble, thanks to electronic signs showing the latest exchange rates.

The currency has lost another 2% of value today, trading at 57.5 roubles to the US dollar.

The cost of insuring Russian government debt has continued to climb today, as the ruble and the oil price both fall.

The five-year Russian credit default swap rose by 18 basis points to 442, up from 424 yesterday. That means it costs €442,000 per year to insure €10m of five-year bonds, and is a five and a half-year high.

This might displease Juncker; the latest opinion poll from Greece shows the left-wing Syriza party holding a five point lead over New Democracy (currently in power).

There’s no election at this stage, though - but one could come in late January if the Greek parliament rejects the government’s presidential nominee, Stavros Dimas.

The uncertainty has sent the cost of insuring Greek bonds soaring:

Jean-Claude Juncker has also admitted that the revelations of massive tax avoidance through Luxembourg, which he ran for years, have hurt his reputation as head of the Commission.

He told my colleague Ian Traynor that:

“I don’t feel damaged subjectively because I know what I did and I did not do. But I am not naive, not a village idiot, and I have to objectively take on board that many people in Europe now have doubts about the honourable side of the new commission president. I have to live with that.”

European Commission president Jean-Claude Juncker has caused a stir in Greece, after appearing to urged the population not to elect the left-wing Syriza party.

In what may prove a counter-productive intervention, Juncker told an Austrian TV station that he hoped “extreme forces” wouldn’t take power in Greece.

“I think that the Greeks – who have a very difficult life – know very well what a wrong election result would mean for Greece and the eurozone.”

Eurozone factories barely grew in October, underlining the weak state of the economy.

Industrial production in the euro area rose by just 0.1% during the month, half as fast as hoped. That means production has grown by a meagre 0.7% over the last year, and 0.8% in the wider European Union.

Over the last year, the highest increases in industrial production were registered in Ireland (+38.8%), Romania and Slovenia (both +3.9%), and the largest decreases in Denmark and Italy (both -3.0%) and the Netherlands (-1.4%), Eurostat adds.

The slowdown in Britain’s construction sector highlights the challengers facing builders, says Stefan Friedhoff, global corporates managing director for construction at Lloyds Bank Commercial Banking:

“Construction companies are grappling with myriad issues, including inflation-led cost overruns, a competitive bidding environment and labour constraints.

The shortage of skilled workers is undermining current output levels and, unchecked, it threatens the long-term health of the sector.”

The Central Bank of the Russian Federation may have thrown $700m at the ruble this morning after it hit new lows (details), Reuters reports.

• RUSSIAN CENBANK LIKELY INTERVENING ON FOREX MARKET ON FRIDAY, POSSIBLY SPENDING $700 MLN, AFTER ROUBLE HITS NEW LOWS - TRADERS - RTRS
  

Italy’s inflation rate was a little higher than expected last month, but remains worryingly low.

The annual harmonised Italian consumer prices index rose by 0.3% in November, statistics body ISTAT said, up from 0.2% first estimated. On a month-on-month basis, prices fell by 0.2%.

The slump in the oil price may give little boost to the global economy, the International Energy Agency has just warned.

In its latest monthly report, the world energy watchdog cut its forecast for demand growth in 2015 by 230 000 barrels per day, to 900,000 per day.

The IEA predicted that the plunge in the oil price is unlikely to result on lower supplies soon:

“Barring a disorderly production response, it may well take some time for supply and demand to respond to the price rout,”

And the IEA also suggested that the “stimulus effect” from the drop in crude prices may be modest, as “Weak oil demand was itself a key factor behind falling prices.”

The rouble is fluctuating wildly this morning, amid reports that the Russia’s central bank may have just intervened to give the currency some support.

One Moscow-based trader tweets that the Russian central bank sold dollars and bought rouble to stem the downturn.

The rouble did indeed recover, but then staggered back towards the 58-to-the-dollar mark for the first time ever.

The Greek stock market has dropped by another 2% in early trading in Athens, extending the losses this week to over 20%.

The selloff is picking up pace, pushing the FTSE 100 down by 80 points to 6381.

The fallers list is led by Coca-Cola Hellenic - Greece’s largest company, which bottles soft drinks in 28 countries.

Fear is rising in Europe’s markets..... the Euro Stoxx 50 volatility index is up 9.8% today. That shows a rise in risk aversion.

Another sign of nerves and pessimism in the markets; the interest rate on German bonds has hit a new low.

Investors continue to pile into bunds today, driving up the price to record highs. That has pushed down the yield on 10-year bunds to just 0.65%; a remarkably low rate of return.

Traders are also nervous after the Greek prime minister warned on Thursday that the eurozone debt crisis could erupt again.

Antonis Samaras predicted chaos if his government were to collapse over this month’s presidential vote, triggering yesterday’s share and bond rout.

Darren Courtney-Cook, head of trading at Central Markets Investment Management, summed up the mood this morning:

“Greece is rearing its ugly head again. It’s not good for the euro zone.”