Nedgradering av europeiska kreditbetyg

S&P downgrades France and Austria from triple A 
The familiar pattern of the Eurozone debt crisis reasserted itself on Friday as Standard & Poor’s downgraded France and Austria from triple A by one notch to double A plus. Italy, Spain and Portugal were also downgraded two notches, while 14 of the 16 eurozone countries were given a negative outlook. Please see attached document for a full updated list of S&P Ratings of Eurozone Member States. For more information and our comments, please contact our Stockholm Office.

• The downgrades to France and Austria leaves Germany, the Netherlands, Finland and Luxembourg as the four triple A sovereigns in the euro currency area. Italy, Spain, Portugal, Slovakia, Slovenia, Cyprus and Malta were also downgraded.
• The downgrades to France and Austria are not a surprise. Indeed, the fact that French bond yields did not sell off dramatically despite rumours of the announcement suggests much of the impact may be priced in. French 10-year bond yields edged up to 3.05%.
• Nevertheless, the downgrades reignite fears over the EFSF rescue fund, suggesting its triple A rating could be under pressure due to the downgrades of its guarantors. France contributes a fifth of the $780 billion in sovereign guarantees behind the EFSF. There is a possibility that European nations may be called on again to increase contributions.
• Encouragingly, the benchmark European Financial Stability Facility bond (maturing in 2022) did not sell off significantly and in a bond market where liquid alternatives are scarce, there is reason to believe that the demand for EFSF bonds should hold up, in much the same way as demand for treasuries did after the US downgrade.
• The news come at the same time that debt-restructuring talks between Greece and holders of its debt broke down over how large bondholders’ losses should be, raising the possibility of a Greek default in March. §Standard and Poor's criticised the response of policymakers to the crisis so far, stating that austerity and budget discipline alone were not sufficient to resolve the situation, and that these policies risked becoming self-defeating. Nevertheless, the downgrades provoked a predictable backlash from eurozone politicians.

  “It is not good news ... but it is not a catastrophe.”  François Baroin, French Finance Minister.

“The downgrade of France was largely expected and it is certainly not as bad as a broader downgrade of triple A rated nations including Germany would have been. Italy and Portugal both experienced two notch downgrades. This leaves Italy with the same rating as Ireland, with Standard & Poor’s being the first agency to move Italy into BBB. The downgrade of Portugal relegates them to junk status, in line with Fitch and Moodys. The change in Finland's outlook to negative is slightly surprising, as we believe that, in many respects, it has stronger fundamentals than Germany. There are positives for Belgium and Ireland who both avoided downgrades, with the latter country receiving what looks like a vote of confidence in their commitment to fiscal reforms. Slovakia can also take some comfort from the fact that, despite its one notch downgrade, its outlook is one of only two countries to be left at stable.”
Andrew Wells, CIO, Fixed Income, Fidelity Worldwide Investment 

“While the downgrades to France may not be too surprising to markets, it is still disappointing news that will drag down the Euro and equity markets. The Eurozone crisis is now dominating market activity again, after a period in which better economic news from the US, and easier monetary policy in China had helped markets move higher.

The downgrades confirm our view that we are witnessing a general re-pricing of sovereign debt. This re-pricing started with the weakest sovereigns such as Greece, but has now decisively moved to the primary bond issuers. We expect it to spread further. There will be another round of policy action to shore up markets, but policy credibility has been dealt another blow. Speculation around an EFSF downgrade will now grow, complicating its ability to raise capital and displace the ECB in the sovereign bond purchasing programme. Both the ECB and the IMF will get sucked further into central roles.

At the same time, the profit outlook for European companies has deteriorated, and we have had a disappointing start to the corporate reporting season. Corporate earnings were the one bright spot last year and this supportive driver is now fading. If European equities are to escape another downward spiral, we will need help from elsewhere. The picture in the US is more promising and Chinese equities are rebounding thanks to looser monetary policy, now that inflation has peaked there. One thing is for sure, the pressure on the euro will continue.”
Dominic Rossi, Chief Investment Officer, Equities, Fidelity Worldwide Investment

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