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business newsAt a Glance: S&P Downgrade Actions in Europe
Few surprises here, excluding Belgium, which did not receive a downgrade.
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- France cut from AAA to AA+ with a negative outlook
- Spain cut to BBB+ from A
- Finland affirmed with a AAA rating
- Cyprus cut two notches from BBB to BB+
- Malta cut from A to A-
- Slovakia cut from A+ to A
- Portugal cut to BB (Junk) from BBB- with a negative outlook
- Luxembourg affirmed but receives a negative outlook
- Austria cut to AA+ from AAA with a negative outlook
- Italy cut to BBB+ from A with a negative outlook
- Slovenia cut to A+ from AA- with a negative outlook
- Germany affirmed at AAA, outlook changed from negative to stable
- Netherlands affirmed at AAA, outlook to negative from watch negative
- Estonia affirmed at AA-, outlook to negative from watch negative
- Belgium affirmed at AA, outlook to negative from watch negative
- Ireland affirmed at BBB+ with a negative outlook
Our take: The major surprise is in Belgium, which did not receive a downgrade after nationalizing Dexia rather than allowing the firm to go bankrupt earlier this fall. Austria was likely to be downgraded due to its ownership of debt in Hungary, which was downgraded by the S&P two weeks ago.
Germany's affirmed AAA rating should not be a shocker. Despite the country's large public debt, its economy is the strongest in Europe. However, since the two largest contributors to the European Financial Stability Fund (EFSF) outside of Germany have been downgraded (France and Austria), you can expect the S&P to make some sort of decision about the EFSF's credit rating soon.
Be on the lookout for poor performance at debt auctions in France and Italy on Monday and Tuesday, as results will forecast whether or not these countries will be in the market for further downgrades.
This evening's actions should also have a negative effect on the Euro, as according to the CFTC, there's a record amount of net-shorts in the Euro for the week ending January 10. The actions may also damper any bullish follow-through in US Equity Indexes, like the Dow Jones Industrial (^DJI), S&P 500 (SPY), Russell 2000 (IWM) and NASDAQ (QQQ).
Twitter: @MichaelSedacca
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