SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 28 SEPTEMBER 2015ANALYST CONTACTSIrina Baron Asst Dir-Research Associate irina.baron@moodys.comXian Li Senior Research Analyst xian.li@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Sovereign Risk ReportMigrant Crisis Puts European Unions Accord to the Test Market-based measures of credit risk for European countries were mixed this past week, as a stream of weak economic data and divisions over policy highlighted the ongoing difficulties still facing the region. European Union leaders stood divided over a plan to resolve the regions migrant crisis, with Germany, Sweden, Austria, and Italy pushing for a fixed quota system, while several eastern European countries expressed skepticism. During an emergency summit in Brussels on Wednesday, European leaders agreed to provide at least ª1 billion in aid to Lebanon, Jordan, and Turkey. Romania and Slovenia recorded some of the sharpest week-on-week increases in default probability, with their one-year Sovereign EDF' (Expected Default Frequency) 1 , 2 , measures rising by 29% and 13%, respectively.Figure 1: Select Countries Involved in the Migrant Crisis in Europe (%)The Eurozones yearly rate of inflation was recorded at 0.1% in August 2015, slowing from 0.2% in the previous two months. The decline was largely driven by falling prices of fuels and unprocessed food. Markits Eurozone Composite Purchasing Managers Index (PMI), a measure of activity in the manufacturing and services sectors, was 53.9 in September,MOODY'S ANALYTICS SOVEREIGN AND SUPRANATIONAL2 28 SEPTEMBER 2015 SOVEREIGN RISK REPORT: MIGRANT CRISIS PUTS EUROPEAN UNIONS ACCORD TO THE TESTdown from the August reading of 54.3 3 . The fastest contraction in Chinas factory activity in seven years added to existing worries about the overall condition of the global economy...
