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Pre-Market Primer: Aftermath of Moody's Downgrade, Much Ado About Nothing


Nobody is surprised about the ratings cuts to the big banks.

MINYANVILLE ORIGINAL Markets are roiling yawning after Moody's cut the credit ratings of some of the major investment banks.

Fifteen global banks were downgraded by Moody's yesterday, but investors and the banks themselves are not particularly surprised. As usual, the markets are a step ahead of the ratings agencies, and the credit downgrades are already priced in. In fact, Bank of America (BAC), Morgan Stanley (MS), Goldman Sachs (GS), Citigroup, (C), and JPMorgan Chase (JPM) shares traded higher before the bell despite being cut by two notches each. Morgan Stanley was expecting an even deeper cut, and the investment bank's stock rose 3.3% in the pre-market. The cost of insuring debt by several of the banks actually fell.

The markets' concerns are turning towards Germany. Today, it came out that economic sentiment and business expectations in Germany's Ifo Survey fell this month. Yesterday, Germany posted its second straight decline in manufacturing and services. Economic slowdown is also a concern in China, Brazil, and India. China and Brazil entered into a bilateral $30 billion currency swap deal in which each central bank can tap the other in case either country faces a freeze in liquidity.

Italian consumer confidence dropped to a record low this month as Mario Monti's fiscal policies are spreading more misery in the eurozone's most indebted nation.

European stocks are down today amidst the bad data. Today, there are no major US economic announcements, and futures are pointing towards a higher opening. Dow (^DJI) futures are up 0.34% at 12,544.00 while S&P 500 (SPY) futures rose 0.33% to 1,322.70. Futures on the Nasdaq (^IXIC) gained 0.21% to 2,557.00.

Twitter: @vincent_trivett
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