On Friday the markets began to worry as news broke that Standard & Poor's was planning on cutting the ratings of a number of euro countries, including France. However, come Monday morning, the markets were remarkably subdued.
On Friday the markets began to worry as news broke that Standard & Poor’s was planning on cutting the ratings of a number of euro countries, including France. However, come Monday morning, the markets were remarkably subdued, perhaps because, as the AP reports, the “downgrades had been widely expected.”
At the beginning of December, 15 of 17 euro nations were put on watch and on Friday S&P dropped the axe on nine countries.
France, Austria, Malta, Slovakia and Slovenia were all downgraded by one notch, while Italy, Spain, Portugal and Cyprus were downgraded by two. Portugal’s and Cyprus’ cuts meant that the countries were cut to junk status.
And despite the bloodbath, the countries aren’t safe yet. Of those downgraded, only Slovakia was given a stable outlook. The others will continue to have negative outlooks, meaning there is a one-in-three chance they could be downgraded in the next year or two.
According to MarketWatch, S&P’s actions took place because when Europe’s leaders met to discuss the debt crisis, they failed to take any decisive action toward resolving the issues.
“The political agreement does not supply sufficient additional resources or operational flexibility to bolster European rescue operations, or extend enough support for those euro zone sovereigns subjected to heightened market pressures,” S&P said in a statement.
Germany retained its triple-A rating and even had its outlook upgraded from negative to stable.
On Monday, the index of top European shares hadn’t changed from closing on Friday, while the U.S. markets were closed for Martin Luther King Jr. Day.
The Wall Street Journal
And now that Europe has been hit, is reporting that countries in the Asia-Pacific region could be next.
“Korea, Japan and Singapore are among export-driven economies that have already seen demand hurt by Europe's debt crisis” according to the article. “Australia's economy is also vulnerable because the country's mining boom is strongly pinned to Asian growth.”