Ratings agency Moody's downgrades Greece

March04, 2012

THE ratings agency Moody's has downgraded Greece to the lowest rating on its bond scale, following a deal with private investors that would see them ultimately lose 70 per cent of their holdings in Greek debt.

Moody's lowered Greece's sovereign rating to C from Ca late on Friday, arguing that the risk of default remains high even if a bond-swap deal with banks and other private investors, due to be completed this month, is successful.

It said it would "re-assess the credit risk profile" after Greece issues the new bonds.

Ratings agency Standard & Poor's took similar action on February 27.

The swap deal aims to cut 107 billion euros ($132.42 billion) from the country's debt, and would see private investors lose more than half the face value of their Greek bonds in exchange for new ones issued with more favourable repayment terms for the crisis-hit country.

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The exchange is an integral part of a second bailout package for Greece by other eurozone countries and the International Monetary Fund.

"Looking ahead, the EU program and proposed debt exchanges will reduce Greece's debt burden, but the risk of a default even after the debt exchange has been completed remains high," Moody's said.

"Moody's believes that Greece will still face medium-term solvency challenges: its stock of debt will still be well in excess of 100 per cent of gross domestic product for many years, the country is unlikely to be able to access the private market once the second assistance package runs out, and its planned fiscal and economic reforms will still face very significant implementation risks."

(sourced heraldsun.com.au)

S&P’s Adelson Steps Down as Chief Credit Officer, Jacob Leaves in Shuffle

Friday, Dec09, 2011

Standard & Poor’s is replacing its chief credit officer, Mark Adelson, as the world’s largest ratings company winds down a year in which its grades of governments have faced growing scrutiny.

Adelson, 51, who oversaw an overhaul of S&P’s methodologies that was designed to address their failures during the collapse of the mortgage-bond market, will become a “senior research fellow,” the New York-based unit of McGraw-Hill Cos. said yesterday in a statement. Also, David Jacob, global head of structured finance, will depart at the end of the month.

The changes come three months after Douglas Peterson left Citigroup Inc. to become S&P’s president, following its decision to strip the U.S. of its top AAA ranking. This week, the firm warned it may downgrade Germany, France and 13 other European countries. Even as S&P’s moves roil credit markets, McGraw-Hill is planning to separate its financial businesses from its textbook publishing unit under pressure from hedge fund Jana Partners LLC.

“There are a lot of changes going on at McGraw-Hill broadly,” Peter Appert, an analyst who follows the company at Piper Jaffray & Co. in San Francisco, said in a telephone interview. Peterson has been discussing removing layers of management, he said.

Ian Thompson, who was previously responsible for the Asia- Pacific region, will replace Adelson, S&P said in the statement. Peterson, the former chief operating officer of Citibank NA, replaced Deven Sharma, who had led the unit since 2007.
Worked Together

Jacob and Adelson joined S&P in 2008 from Adelson & Jacob Consulting, where they worked together. Jacob took over a structured-finance business that was blamed by congressional investigators for contributing to the worst financial crisis since the Great Depression by assigning top grades to risky real-estate bonds.

Under Adelson, S&P revised the way it graded governments, banks and bonds backed by assets such as mortgages. The new criteria for structured finance were designed to be “tougher,” Adelson said in an undated video on S&P’s website. Any bonds carrying AAA ratings should be able to withstand stress similar to the Great Depression, Adelson wrote in a paper in 2009.

S&P downgraded the U.S. one step to AA+ on Aug. 5, saying that gridlock in Washington and the rising national debt were making it riskier to invest in government bonds. The cut was questioned by President Barack Obama, who said in a speech on Aug. 8 that the ratings company was basing its judgment on politics, not on the government’s ability to pay its debts.
Europe Warning

On Dec. 5, S&P warned that it may cut 15 euro nations as policy makers prepared to meet in Brussels to end a crisis that led to bailouts of Greece, Ireland and Portugal, and now threatens to engulf Italy.

European Central Bank governing council member Christian Noyer lambasted S&P.

“They changed their methodology and it’s now more linked to political factors and less to fundamentals,” Noyer said on Dec. 5 at a conference in Paris. “The rating agencies fueled the crisis in 2008 and we can question whether they’re not doing the same thing in the current crisis.”

Moritz Kraemer, S&P’s head of European sovereign ratings, denied that the company was trying to influence politics.
Deal Scuttled

In July, S&P withdrew grades it had assigned to a $1.5 billion offering of bonds backed by commercial mortgages from Goldman Sachs Group Inc. and Citigroup Inc., forcing the banks to scuttle the deal after it was placed with investors.

“The manner in which S&P took its action has severely eroded investor and issuer confidence in its ratings,” Morgan Stanley analysts led by Richard Parkus in New York wrote in a note on July 28.

Last month, after revising its bank criteria, S&P lowered its ratings of Goldman Sachs Group Inc., Bank of America Corp. and UBS AG.

Prior to consulting, Adelson was head of structured finance research at Nomura Securities International, according to a statement announcing his hiring.

S&P also said that it was looking to hire a new chief economist and chief risk officer. McGraw-Hill said on Dec. 7 it would eliminate 550 jobs at its education unit.

(sourced Bloomberg)

Moody's warns Belgium it risks credit rating cut

Sat Oct 8, 2011
By Daniel Bases and Philip Blenkinsop

NEW YORK/BRUSSELS (Reuters) - Moody's warned Belgium on Friday its credit rating could fall due to the burden of bailing out Dexia, the French-Belgian financial group, and the prospect of higher funding costs and weak economic growth.

The ratings agency said it had placed Belgium's Aa1 government bond ratings, one notch below the top Aaa status, on review for possible downgrade.

Moody's joins Standard & Poor's and Fitch, which have put their AA-plus ratings for Belgium's on negative outlook in the past year. Both said Belgium's lack of a fully fledged government undermined budget efforts in one of the euro zone's most indebted states.

Moody's cited three reasons for its review: materially increased funding costs for sovereigns and banks of countries with high debt, risks to growth of Belgium's open economy, and the weight on public finances of supporting the banking sector.

Dexia is on the verge of being split up by Belgium and France, though a Dexia board meeting to discuss the group's future has been pushed back to Sunday from Saturday. Dexia, whose shares fell 42 percent this week alone, has been struck by both its heavy exposure to Greece and troubles accessing wholesale funding.

Belgium is to pay for the likely nationalization of Dexia's Belgian banking business and its share of guarantees for a "bad bank" of Dexia assets, including euro zone periphery debt.

In the course of its near-term review of Belgium's rating, Moody's said it will include a close look at the potential for additional government measures to support "the banking system, or individual banks."

"In this regard, Moody's intends to assess the potential costs and additional contingent liabilities that the government may incur in supporting the Dexia Group," Moody's said.

Belgium has found itself in the middle ground between the core triple-A-rated euro zone countries and those at the periphery of the single currency bloc whose sovereign debt has sold off sharply since the middle of 2010.

It has been without a new government since a parliamentary election in June 2010, and its public sector debt totalled 96.6 percent of annual output last year, putting it behind only Greece and Italy in the euro zone and on a par with bailout recipient Ireland.

The spread between yields on Belgian 10-year bonds and those on equivalent German bunds, a sign of the perceived risk of Belgian debt, pushed to a three-week high of 222 basis points on Wednesday; the spread fell to just below 200 on Friday.

Belgium's caretaker government plans to restrict the 2011 budget deficit to 3.3 percent of gross domestic product, comfortably below the average for the euro zone, and the chances of a new government forming have increased markedly in recent weeks.

Belgium is planning to bring the deficit down to 2.8 percent in 2012.

Belgium's debt agency has also sold 35.4 billion euros ($47.8 billion) of bonds this year, just short of its 36 billion euro target for the whole year, with two further debt auctions scheduled.

Financial markets were already unsettled on Friday after Fitch Ratings cut Italy's sovereign credit rating by one notch and Spain's by two, citing a worsening of the euro zone debt crisis and a risk of fiscal slippage in both countries.

(sourced Reuters)

Stocks Fall, Euro Erases Gain as Fitch Cuts Credit Ratings of Italy, Spain

Fri,Oct7, 2011
By Rita Nazareth and Cordell Eddings

U.S. stocks fell, halting a three-day rally, and the euro erased earlier gains versus the dollar after Fitch Ratings downgraded the government debt of Spain and Italy. Treasuries retreated, pushing 10-year note yields toward their biggest weekly increase since July.

The Standard & Poor’s 500 Index slipped 1 percent to 1,153.44 at 12:34 p.m. in New York after rebounding more than 8 percent from a one-year intraday low on Oct. 4. The euro lost 0.2 percent to $1.3405 after climbing as much as 0.7 percent. The 10-year note yield increased nine basis points to 2.08 percent and has climbed 16 points in five days.

Faster-than-forecast growth in U.S. employment was overshadowed by concern Europe’s debt crisis will worsen. Italy had its foreign and local currency long-term issuer default ratings cut to ‘A+’ from ’AA-,’ while Spain had the same set of ratings cut to ‘AA-’ from ‘AA+.’ The outlook for both is negative.

Government data showed payrolls climbed by 103,000 workers, topping the median forecast in a Bloomberg News survey of economists for a rise of 60,000. The data followed reports earlier this week showing faster-than-estimated growth in manufacturing, construction and service industries, improving retail sales and signs that European leaders were stepping up efforts to tame the region’s sovereign debt crisis.

The 30-year Treasury bond’s yield climbed nine basis points to 3.04 percent and is up 12 points the this week. Two-year yields climbed one basis point to 0.28 percent, up three points on the week.

‘Positive Surprise’

“We saw a positive surprise in payrolls and the market has to respect that and push yields higher on the optimism, but no one is too excited about the data given the uncertainty in Europe,” said Suvrat Prakash, an interest-rate strategist in New York at BNP Paribas SA, one of the 20 primary dealers obliged to participate in U.S. debt offerings. “The uncertainty isn’t going away anytime soon.”

The S&P 500 rebounded more than 8 percent from a one-year intraday low on Oct. 4. The benchmark index sank 14 percent in the third quarter and this week came within 1 percent of extending its decline from its April peak to 20 percent on a closing basis, the common definition of a bear market. The slump pushed the index to 12 times reported earnings, the cheapest valuation level since 2009, according to data compiled by Bloomberg.

The S&P GSCI commodities index is poised to snap a streak of four straight weekly declines.

Jobs Revision

The government jobs data also showed hours and earnings both increased and revisions to previous reports added a total of 99,000 jobs to payrolls in July and August. The jobs report last month showed no gain in non-farm payrolls for August.

“This is yet another data point suggesting that the U.S. is not moving toward recession any time soon,” Richard Skaggs, senior equity strategist at Loomis Sayles & Co. in Boston, which manages more than $150 billion, said in a telephone interview. The revisions to prior months “were significant,” he said. “Last month, the unchanged number really sent stocks for a loop.”

The rate by which data on the economy has been trailing forecasts has been decreasing since June, according to the Citigroup Economic Surprise Index. The U.S. gauge, which fell below zero on April 29 as the S&P 500 was peaking, has climbed from a low of minus-117.2 on June 3 to minus-14.7.

Earnings Season

Alcoa Inc., the largest U.S. aluminum producer, will mark the unofficial start of the earnings-reporting season when it reports results on Oct. 11. Third-quarter profits for S&P 500 companies are projected to have grown 13 percent, according to analyst forecast compiled by Bloomberg, down from an estimate of 17 percent when the index traded at a three-year high at the end of April.

The Stoxx Europe 600 Index rose 0.8 percent to extend its weekly gain to 2.6 percent. Gauges of energy producers and auto companies climbed more than 1.7 percent to lead gains among 19 industries.

European markets closed before Fitch downgraded Italy and Spain.

The yield on 10-year Italian bonds rose seven basis points to 5.49 percent. The nation said it plans to sell securities maturing between 2016 and 2025 on Oct. 13. Spanish yields fell two points to 4.97 percent.

German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in Berlin on Oct. 9 to discuss Greece’s debt problems as the nation edges closer to default. It will be their eighth one-on-one summit in 20 months.

The BSE India Sensitive Index, or Sensex, added 2.8 percent after Citigroup raised its rating on the nation to “neutral.” The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong advanced 3.7 percent. Benchmark indexes gained more than 2.6 percent in Russia and South Korea.

(sourced Bloomberg)

UK banks downgraded

Fri,October07, 2011

Leading British banks saw their credit rating slashed Friday amid fresh concerns over future bailouts and a stark warning from the governor of the Bank of England over the serious nature of the current global financial crisis.

In remarks reported Friday, Mervyn King, the central bank governor, warned that the world economy was slowing down “much faster” than expected just a few months ago.

“This is the most serious financial crisis we've seen at least since the 1930s, if not ever,” King said in a stark reference to the Great Depression.

His remarks followed the bank's decision Thursday to inject a further 75 billion pounds (116 billion dollars) into the economy, under the so-called scheme of Quantitative Easing (QE), which has now reached a total level of 275 billion pounds.

Rating agency Moody's said Friday that it had downgraded the credit rating of 12 banks and financial institutions in Britain, including partially state-owned Royal Bank of Scotland (RBS) and Lloyds.

Moody's said it now believed the British government was “less likely” to support some firms if they got into trouble. It emphasised that the downgrades did not “reflect a deterioration in the financial strength of the banking system.”

Other banks and firms included Santander, Nationwide and a number of smaller building societies.

The move triggered a fall in leading banking shares on the London Stock Exchange of more than 3 per cent.

It coincided with a report in the Financial Times Friday that RBS, the bank at the centre of the 2008 credit crunch, require additional recapitalization.

“Moody's has lowered the amount of support it incorporates into the institutions's ratings to reflect the overall weakening support environment,” said a statement released by the agency.

The downgrades include a two-notch cut for government-controlled RBS, and a one-notch cut for Lloyds TSB, a division of part-nationalized Lloyds Banking Group.

It categorized the two banks as having a “high likelihood of support.”

Spanish bank Santander had its British business downgraded by one notch, while Nationwide Building Society suffered a two-notch reduction.

George Osborne, the Chancellor of the Exchequer, said the rating agency's decision was in line with government policy to tackle the “too-big-to-fail problem.”

“Credit rating agencies and others will say, well actually these banks have got to show they can pay for their way in the future.”

But he dismissed suggestions that British banks were not sufficiently capitalized. “They are not experiencing the kinds of problems that some of the banks in the eurozone are experiencing at the moment,” said Osborne.

The Financial Times said Friday that the government was concerned that RBS “may need more government money” as part of a wider European effort to recapitalize the banking system - Sapa-dpa.

(sourced iol)

S&P cuts Italy ratings one notch, outlook negative

Tue Sep 20,2011

REUTERS - Standard and Poor's downgraded its unsolicited ratings on Italy by one notch to A/A-1 and kept its outlook on negative, a major surprise that threatens to add to concerns of contagion in the debt-stressed euro zone.

The single currency skidded over half a cent to $1.3606 after S&P said the cut reflected its view of Italy's weakening economic growth prospects.

Italy's fragile governing coalition and policy differences within parliament will likely limit the government's ability to respond decisively to the challenging domestic and external macroeconomic environment, the agency said.

"In our opinion, the measures included in and the implementation timeline of Italy's National Reform Plan will likely do little to boost Italy's economic performance, particularly against the backdrop of tightening financial conditions and the government's fiscal austerity program," said S&P.

The move from S&P came as a surprise as the market had thought Moody's was more likely to downgrade Italy first. Moody's last week said it would take another month to decide on its action.

The downgrade came as Greece struggles to meet demands from lenders for yet more austerity measures.

"It's just more of the same negative news," said Stephen Roberts, a senior economist at Nomura in Sydney.

"It only adds to the contagion risk over Greece and has encouraged the flight to safety in markets here," he added, pointing to a sharp fall in the Australian dollar on the news.

S&P 500 futures also dropped 0.7 percent and early hopes for a bounce in Asian shares on Tuesday looked to be still-born now.

European stocks had already slid on Monday, while yields on Italian and Spanish bonds rose sharply on fears of a Greek default, compounded by the failure of EU finance ministers to agree new steps to resolve Europe's debt crisis at weekend talks.

International lenders told Greece on Monday it must shrink its public sector and improve tax collection to avoid running out of money within weeks as investors spooked by political setbacks in Europe dumped risky euro zone assets.

Finance Minister Evangelos Venizelos held what Greece termed "productive and substantive" talks by telephone with senior officials of the European Union and International Monetary Fund after promising as much austerity as necessary to win a vital next instalment of aid.

Before the talks, which will resume on Tuesday evening after meetings of experts through the day, the IMF representative in Greece spelled out steps Athens must take to secure the 8 billion euro loan payment it needs to pay salaries and pensions next month.

Moody's cuts Japan rating, blames politics

Wed Aug 24, 2011
By Rie Ishiguro and Kaori Kaneko

TOKYO (Reuters) - Moody's Investors Service cut its rating on Japan's government debt by one notch to Aa3 on Wednesday, blaming a build-up of debt since the 2009 global recession and revolving-door political leadership that has hampered effective economic strategies.

Japan is preparing to elect its sixth leader in five years to replace unpopular Prime Minister Naoto Kan, under fire for his handling of the response to a March tsunami and subsequent radiation crisis at a crippled nuclear power plant.

The downgrade, while not out of the blue, served as another reminder of the debt burdens that nearly all of the world's major advanced economies shoulder, even as policymakers struggle to agree on ways to stimulate sub-par growth.

The United States lost its top-tier AAA rating from Standard & Poor's earlier this month, and Moody's warned in June that it may downgrade Italy as Europe's sovereign debt crisis festers.

Moody's new rating on Japan's debt is three notches below coveted AAA status, which Tokyo lost in 1998, but is still classified as high grade.

"Over the past five years, frequent changes in (Japan's) administrations have prevented the government from implementing long-term economic and fiscal strategies into effective and durable policies," Moody's said.

Moody's had warned in May that it might downgrade Japan's Aa2 rating due to heightened concerns about faltering growth prospects and a weak policy response to rein in bulging public debt, already twice the size of its $5 trillion economy.

Finance Minister Yoshihiko Noda, a fiscal conservative who has joined the race to succeed Kan, refrained from direct comment on Moody's downgrade. But he said: "Recent JGB auctions have met favourable demand and I don't see any change in market confidence in JGBs."

Analysts said the downgrade was hardly a surprise and the bond market reaction was muted.

"I had expected that the rating cut would have taken place after the election for the leadership of the (ruling) Democratic Party of Japan. But looking at the candidates, there seems to be nobody among them who would seriously tackle financial reform, so that's why Moody's went ahead and cut the rating," said Yuuki Sakurai, CEO and president of Fukoku Capital Management Inc.

Japan's next leader has a mountain of challenges ahead, from battling a soaring yen and forging a post-nuclear crisis energy policy to rebuilding from the tsunami and reining in public debt, while paying for reconstruction and the bulging costs of an ageing society.

The March disasters knocked the economy back into recession, and the strength of an expected rebound later this year is being clouded by weak domestic and global demand and recent gains in the yen, which threaten export competitiveness.

The government on Thursday unveiled steps to help firms cope with the yen's recent rise to record highs, including a $100 billion emergency credit facility aimed at making it easier for Japanese companies to buy foreign firms.

It also said it would ask major financial firms to report on dealers' currency positions for the period to the end of September, an apparent attempt to curb speculation.

"We are watching more carefully than before whether there is any speculative activity in the market. We won't exclude any options and will take decisive action when necessary," Noda told a news conference to announce the government measures.

Noda's chances of winning an Aug. 29 ruling party leadership race to pick Kan's successor dimmed this week after former Foreign Minister Seiji Maehara, who says beating deflation should be the top priority, reversed course and decided to run.

TAX HIKES AND TIMING

Most of the seven DPJ candidates eyeing the top job agree Japan must eventually raise its 5 percent sales tax to help fund the ballooning social welfare costs of its fast-ageing society. Only Noda, however, favours raising other taxes soon to fund reconstruction of Japan's tsunami-devastated northeast region, and even he has been toning down that stance lately.

"While most people in the market believe Maehara is very likely to win the election, a swift policy response on debt problems is unlikely to come out soon," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

Moody's said Japan needed to achieve 3 percent nominal growth in its gross domestic product to get the deficit under control and that a government plan to double the 5 percent sales tax by mid-decades was not bold enough.

"That's not enough. The government knows that as well," Tom Byrne, Moody's senior vice president and regional credit officer, told Reuters in a telephone interview.

The yen barely moved on the downgrade news, trading at around 76.7 to the dollar, while 10-year JGB futures were up 0.08 point at 142.63 at the end of the morning session after initially dipping into negative territory. Japanese stocks eased.

Moody's said the outlook for Japan's credit rating was now stable given the "undiminished home bias of Japanese investors and their preference for government bonds, which allows the government's fiscal deficits to be funded at the lowest nominal rates globally".

Byrne told Reuters that as a rule, the rating was not expected to change for 12 to 18 months.

The downgrade brings Moody's rating for Japan into line with rival agency Standard & Poor's, which cut Japan's rating in January to AA minus, the fourth-highest on its scale.

Moody's downgrade of Japan was its first since 2002, when it reduced the rating to A2, six notches from the top. It had upgraded Japan three times since then, with the last upgrade as recent as May 2009.

Persistent deflation and slow growth has shackled Japan's economy for years, reducing tax revenues available to the government, which has grown to rely on debt issuance to finance a large part of its budget.

Life after the U.S. rating downgrade

Aug 12, 2011

By Nipun Mehta, Reuters

The unthinkable (for some) happened last week when the U.S. economy was downgraded from ‘AAA’ to ‘AA+’ with a negative outlook by Standard & Poor’s, one of the three large global rating agencies.

That led to an interesting situation where European economies like France and the UK are rated higher than the U.S., despite huge concerns about their financial condition. The event would undoubtedly have hurt the American ego, particularly since S&P announced that there could be more downgrades in the offing.

That this was an event that was imminent is accepted by many, but what is in store for the global economy and the Indian economy going forward?

There are several concerns that will keep haunting the central banks, the equity markets and governments around the world. These include:

- What if the UK and France are downgraded too?

- Will the other two rating agencies also downgrade U.S. in a few weeks’ time?

- How long before some U.S. companies and state and local governments get downgraded?

- Why is Spain still rated AA, Italy A+ and Ireland BBB+, when India and Brazil are rated ‘BBB-‘, by Standard & Poor’s? Will these European economies be downgraded soon?

- At ‘BBB-‘, why are India and Brazil rated the same as Portugal which has serious economic issues?

While a downgrade of one or more of the European economies is waiting to happen, one can rest assured that any such event can and will have a severe contagion effect on the other EU economies due to their linkage. Several European banks would undergo a rating change too under such circumstances.

The fact remains that even as far as the EU is concerned, the situation is delicate and we continue to tread on thin ice. Amidst all this is the bigger question of how long the U.S., being the world’s largest economy, will take to come out of the recessionary condition. One could just see another round of QE3 in the U.S. or a round of bank funding that we witnessed by France and the UK in 2008.

The other issue is of fiscal discipline by these countries which are facing a deep financial crisis. The easiest thing to reduce deficits is to raise taxes. What is always difficult for governments is to reduce expenditure as this could further lead to potentially slowing down the economy. It’s always a fine balance that needs to be created between inflationary pressures (that events like quantitative easing measures create) and recessionary conditions (which reduced expenditure can potentially create).

Given the global concerns, world equity and commodity markets will be affected even if they may not be directly impacted by the downgrade. Global currency and bond markets have already seen considerable volatile movements due to movement of large funds into and out of them.

While crude and commodity prices have eased post the event, how long they continue to fall, or sustain at lower levels will determine the inflation levels in several economies, as well as profitability of several companies in the manufacturing sector.

Select Asian economies on the other hand presently face the opposite task of inflationary pressures due to fast paced growth. It is due to this that equity markets in select Asian economies will possibly stabilise faster than the European or U.S. markets.

Risk aversion has ensured that funds move to safer asset classes like gold. One should not be surprised if part of these funds move to emerging economies once there are signs of stability in the global markets.

As far as Indian markets are concerned, once the global negative news subsides, it will be a choice between fundamentals, liquidity and valuations. While interest rate concerns, domestic scams and lack of decision making by the government continue to pull down sentiment, fundamentals remain strong and valuations are becoming increasingly attractive.

What is missing is the FII liquidity which can drive the markets upwards. In a situation where both the U.S. and EU face deep concerns over their fiscal policies, it may not be too long before emerging markets and India start attracting flows. We do need to closely watch policy action by the RBI.

Nibble into the equity markets if you have the risk taking ability to see some more volatility arising out of possible announcements from the U.S./ EU economies. If not, wait till there is greater stability in the global markets.

Euro zone crisis reaches France, turns existential

Aug12, 2011 |By Paul Taylor, Reuters

PARIS (Reuters) - It was the week the euro zone debt crisis reached France, one of the twin pillars of the European currency alongside Germany.

As jitters over Paris' prized top-notch AAA credit rating took hold, President Nicolas Sarkozy returned from the beach to order up new austerity measures. Then panic selling of French bank shares and an abrupt halt to economic growth added to France's plight.

The sight of the euro zone's number two economy buffeted by rumours and investor anxiety in the midst of the holiday season raised existential questions about European monetary union that will confront Sarkozy and German Chancellor Angela Merkel when they meet in Paris next Tuesday.

The fragile edifice of support for weaker European states would start to crumble if France, the second contributor to the euro zone's rescue fund, were to face a debt downgrade.

All three major ratings agencies reaffirmed this week that no such downgrade was in the works, but that didn't suffice to calm markets.

Up to now, Sarkozy has projected himself as an energetic statesman orchestrating the rescue of the euro zone. Suddenly he had to turn to crisis management at home.

This week's perfect summer storm wiped 10 billion euros off French banks' market value and left France looking at times like the country in need of help itself.

The disclosure that the economy failed to grow at all in the second quarter, after a healthy 0.9 percent spurt in Q1, amplified concerns about the government's ability to meet its target of cutting the deficit to 5.7 percent of GDP this year.

Worryingly, household consumption fell by the biggest amount in a decade, suggesting consumers are reining in spending because they fear hard times and higher taxes ahead.

UNPALATABLE CHOICES

Just eight months before the first round of a presidential election, Sarkozy faces unpalatable choices between removing more tax breaks to increase revenue and cutting public spending, both of which could further depress anaemic growth.

The centre-right president has tried to upstage his Socialist opposition by proposing to introduce a German-style fiscal rule on deficit reduction in the constitution. Socialist votes would be needed to achieve the required super-majority.

Socialist leaders have refused so far to cooperate with what they call Sarkozy's "trap" and sought instead to blame him for increasing the deficit with tax give-aways for the rich.

The issue is bound to be one of the major battlegrounds of the campaign for the presidential election next April and May.

Sarkozy's approval ratings have improved since Socialist front-runner and former IMF head Dominique Strauss-Kahn was forced out the race after his arrest in New York on sexual assault charges.

But both main contenders for the Socialist nomination, Francois Hollande and Martine Aubry, are still ahead of the president in the polls at the moment.

IRRATIONAL AND RATIONAL

French authorities are still not entirely sure what hit them this week. There were both rational and irrational reasons for the market attack.

When Standard & Poor's knocked the United States off its triple-A perch last Friday, markets started looking for who else might be in line, turning a spotlight on France, with the biggest debt and deficit ratios among the six AAA-rated euro zone countries.

Economist Jacques Attali, a former top aide to President Francois Mitterrand, noted that S&P had specifically compared France with the United States, saying it was the only other AAA country that would have a similar debt ratio in 2015.

"Contrary to what everyone says, we are explicitly singled out," Attali told the daily Le Monde in an interview.

"Hence we must a bring our debt down below 85 percent of GDP by the end of 2013, and get back to 70 percent in this decade. That won't be easy."

The cost of insuring French public debt against default reached a new peak during the week yet by Friday, France's 10-year bond yield had fallen back below 3 percent for the first time since November 2010, hardly a sign of imminent meltdown.

The country does have an Achilles' heel: stress tests have shown that its banks are among the most heavily exposed to debt in the euro zone periphery, particularly Greece and Italy.

The sight of the European Central Bank buying Italian bonds on the secondary market to prevent Rome's borrowing costs rising to unsustainable levels, and reports that Greece's debt swap would be extended to bonds maturing up to 2024, combined with wild market rumours to hit French lenders.

Shares in Societe Generale plunged as much as 23 percent on Wednesday before closing 15 percent lower. BNP Paribas and Credit Agricole suffered lesser hits.

A senior SocGen executive told Reuters the bank was worried that heightened market tensions culd lead to a 2008-type credit crunch in which banks stop lending to one another.

French regulators, joined by their Italian, Spanish and Belgian counterparts, banned short-selling of financial shares on Thursday in a temporary response to try to halt rumour-driven herd behaviour. Bank shares rose modestly on Friday.

A senior risk manager at a large European bank, speaking on condition of anonymity, said one reason for the losses on French and European bank shares was that short sellers were targeting banks instead of government bonds.

"Because it's increasingly difficult to trade CDS on sovereign debt, short sellers take bank shares as proxy for sovereign bonds of the respective countries. If you bet on losses of French sovereign bonds for instance, short selling of French banks is very promising," he told Reuters.

Under cover of anonymity, several traders and government officials suggest hedge funds had shorted French debt in anticipation of a downgrade and turned on the banks when it became clear this was not going to happen.

A French fund manager said he clearly witnessed a "France bashing session" on Wednesday.

He said a U.S. bank had sent a market-wide message citing six reasons to sell shares of a French investment firm. The reasons invoked were "because it is French", six times.

Most Americans say U.S. on wrong track: Reuters/Ipsos poll

By Steve Holland
Aug10, 2011

WASHINGTON (Reuters) - Economic fears are weighing heavily on Americans, with a large majority saying the United States is on the wrong track and nearly half believing the worst is yet to come, a Reuters/Ipsos poll said Wednesday.

The poll reflected growing anxiety about the U.S. economy and frustration with Washington after a narrowly averted government default last week, a credit rating downgrade by Standard & Poor's, a stock market dive and a stubbornly high 9.1 percent jobless rate.

President Barack Obama was politically bruised in the brutal, weeks-long debt debate, and negative views on the economy are worrisome signs for his 2012 re-election bid.

His approval rating dropped to 45 percent from 49 percent a month ago, according to the poll conducted from Thursday to Monday. Obama's predecessor, President George W. Bush, never saw his approval rating dip below 46 percent in Gallup polling in his re-election year of 2004.

The Reuters/Ipsos poll found 73 percent of Americans believe the United States is "off on the wrong track," and just one in five, 21 percent, think the country is headed in the right direction.

The survey found that 47 percent believe "the worst is yet to come" in the U.S. economy, an increase of 13 percentage points from a year ago when this question was last raised.

This is the highest measure since March 2009, when concern peaked at 57 percent, at the height of the recession.

Ipsos pollster Julia Clark said the wrong-track measure reflects widespread unhappiness with the economy and frustration at both political parties, but "you can't say it's a predictor of how Obama will fare" in 2012.

The level of discontent was 10 points higher than a July survey and is the highest in an Ipsos poll since it reached 73 percent in October 2008, at the height of the financial crisis. The polling organization found 77 percent felt the country was on the wrong track in July 2008, during Bush's final year in office.

Gallup has found even higher levels of dissatisfaction at various points over the past 30 years, but it is rare.

2012 IMPACT?

Republicans appear to be suffering the most from the last-minute debt deal last week that was reached only after anguished negotiations between Obama and congressional leaders.

The survey found 49 percent of Americans held a negative view of Republicans after the deal was reached, and 42 percent held a negative opinion of the conservative Tea Party movement. Tea Party conservatives stuck closely to their demand that deficit reduction be handled solely through spending cuts and were willing to risk a default to achieve their aims.

By contrast, 40 percent of those polled saw Democrats in a negative light.

"Coming out of this, the Republicans are I think taking the balance of the blame for the debt deal negotiations," Clark said.

Obama was viewed negatively by 42 percent as a result of the debt deal, while House of Representatives Speaker John Boehner, the top U.S. Republican, was viewed negatively by 37 percent.

A new Washington Post poll, shows nearly 75 percent of Americans say they have little or no confidence in Washington to repair the economy. Nearly 80 percent say they are dissatisfied with the way the political system is working and more than seven in 10 say Washington is focused on the "wrong things."

A USA Today/Gallup poll this week suggested possible evidence of an anti-incumbent wave building, saying only 24 percent of Americans believe most members of Congress deserve re-election, the lowest percentage since Gallup began asking the question in 1991.

Clark said Obama's approval is in relatively safe territory, but that his re-election could be threatened if he were to dip into the 30s.

"A difficult economic situation will create a difficult situation for the president when it comes to re-election a year from now," she said. "When the economy is bad, people look for a change."

The debt agreement that consumed weeks of debate and resulted in a two-staged arrangement to cut spending is not getting rave reviews.

More people surveyed, 53 percent, held a negative view of the compromise agreement, compared to 38 percent who think it is a good deal.

Democrats were more balanced in their views, with 47 percent approving it and 45 percent disliking it. A majority of independents, 53 percent, and Republicans, 63 percent, did not like it.

"The process was very damaging to Washington," said Clark.

Americans held mixed views on the best way to stimulate economic growth. Cutting spending, 49 percent, and taxing the wealthy, 46 percent, came highest, followed by investment in infrastructure, 34 percent.

Democrats are urging Obama to move away from the debate over how to reduce America's structural deficits and concentrate solely on creating U.S. jobs. Obama has signaled he plans to do this.

"Shift the focus on job creation," former New Mexico Governor Bill Richardson told MSNBC.

The Reuters/Ipsos poll of 1,055 adults, including 885 registered voters, had a margin of error of 3 percentage points for all respondents and 3.1 points for registered voters.

Britain, other eurozone countries face ratings cut: Jim Rogers

By Kevin Lim and Harry Suhartono, Reuters

8 Aug, 2011

SINGAPORE (Reuters) - Britain and several euro zone countries are likely to have their credit ratings cut in coming months as debt problems worsen, and Western policymakers are bound to embark on more quantitive easing to get their economies moving, American investor Jim Rogers said on Monday.

He also said Standard & Poor's acted too slowly in stripping the United States of its AAA rating on Friday, and that he remained bullish on commodities as investors turn to real assets amid fears of further quantitative easing by the U.S. and European central banks.

"The idea that the U.S. is downgraded and the UK is not is lunacy. There are many countries, Belgium, Spain, lots of countries in Europe, that should be downgraded just as the U.S. has been downgraded," Rogers said in an interview with Reuters Insider.

Rogers, who co-founded the Quantum Fund with George Soros in the 1970s, is a well-known investor and public speaker known for his bullish views on commodities and China. He now lives in Singapore.

Rogers said he has long positions on agriculture, gold and other commodities and is short on emerging market equities, government bonds and large U.S. financial institutions.

Despite the recent falls in commodity prices and U.S. Treasury yields, he said his positions remained healthy as the losses were offset by gains on his short positions.

Rogers predicted Western governments will embark on a new round of quantitative easing to help spur their moribund economies, as politicians and other policymakers were not prepared to go through the pains of bankruptcy.

"They'll try to disguise it. They'll call it cupcakes or who knows what. It'll cause a big rally in raw materials and commodities because more and more people will realise they are printing money, they are debasing the currency."

CHINA, EUROPE

In contrast, Rogers said China was doing the right thing in trying to cool its economy and combat inflation.

"Is it going to be fun? No, some real estate investors are going to go broke in Shanghai and other parts of China. But that's not the end of the world, that's not the end of the Chinese economy. Things may slow down but China's not going to fall off the face of the world."

Rogers called on European politicians and bureaucrats to face reality and let weak eurozone governments default, and "the people who made the bad loans lose money."

"The idea of printing more money and buying up worthless bonds instead of forcing people to go bankrupt is ludicrous."

"In America, we had states and cities go bankrupt, many times. It didn't end the United States, it didn't end the U.S. dollar. It caused some pain, some terrible pain. But that's how you solve problems."

"You start over from a stronger base, after you acknowledge your mistakes... That's what capitalism is all about."

Euro coal prices soften on oil slide turmoil

Tuesday, 09 Aug 2011

Reuters reported that prompt physical coal prices fell recently in light trade with the market tracking a more than 3% slide in oil due to growing financial turmoil.

August is the annual low point for coal trading activity, because many participants are on holiday and end users are usually covered and do no need fresh cargoes until September or October.

A trader in Europe said "The whole thing has come off on other factors such as oil. It's certainly outside factors and not fundamental coal issues. It's fairly balanced."

As per report, oil dropped recently as worry about an economic slowdown spread after Standard & Poor cut the United States top tier credit rating late on Friday.

Fear gripped financial markets as the fallout from the historic downgrade of the US debt rating by S&P drowned out pledges of assistance from Europe's central bank and soothing words from the Group of Seven.

(Sourced from Reuters)

Tokyo stocks down 4.43% by noon

Tuesday, Aug 09, 2011 |By AFP

TOKYO - Tokyo shares plunged 4.43 per cent on Tuesday morning, a third straight day of heavy selling following massive losses on Wall Street.

The benchmark Nikkei-225 index of the Tokyo Stock Exchange lost 403.25 points to 8,694.31 by the lunch break, falling below the 9,000 mark for the first time since March 17, days after the quake-tsunami disaster.

The Topix index of all first-section issues tumbled 4.64 per cent or 36.34 points to 746.52.

Investors were increasingly nervous that the US economy may slide into another recession as the historic US credit downgrade by Standard & Poor's Friday sent shockwaves through markets already roiled by Europe's debt crisis.

Selling accelerated Tuesday following a plunge in South Korean shares and the release of Chinese data showing July inflation at a more-than three year high despite Beijing's efforts to rein in soaring food costs.

"We're starting to see a panic situation where investors are running for the exit to avoid further losses," Tsuyoshi Segawa, equity strategist at Mizuho Securities, told Dow Jones Newswires.

"The key (to stemming the global equity sell-off) is whether the US Fed will come out with measures, not only to increase liquidity, but to turn around economic conditions," said UBS Chief Strategist Shoji Hirakawa.

He cited the possibility the US Federal Reserve may decide on a third round of monetary easing as it holds a policy board meeting later Tuesday.

Shares in key markets such as the United States and Japan are "nearing their technical bottoms," he added.

Japan's Finance Minister Yoshihiko Noda said he was watching markets closely and staying in close contact with monetary authorities abroad.

He also denied a news report on Tuesday that he intends to resign soon and attempt to succeed unpopular Prime Minister Naoto Kan.

Tokyo Electric Power Company (TEPCO) fell 11.56 per cent to 344 yen after reports it would incur special losses of $6.5 billion for the April-June quarter as it faces huge compensation costs for the Fukushima nuclear disaster.

Oil companies plunged on sharp declines in crude prices, with Inpex down 9.79 per cent at 474,500 and JX Holdings off 7.52 per cent at 467 yen.

Financials also fell amid concerns over a global economic slowdown, with Nomura Holdings losing 7.05 per cent to 316 yen.

Stocks plunged around the world on Monday. On Wall Street the Dow Jones Industrial Average fell 5.55 per cent - its biggest one-day drop since late 2008 - while the broader S&P 500 fell 6.7 per cent and the tech-heavy Nasdaq dived 6.9 per cent.

In Europe Frankfurt was down more than 5.0 per cent, Paris lost 4.7 per cent and London dived nearly 3.4 per cent.

The euro bought $1.4174 in Asian midday trade on Tuesday, marginally down from $1.4179 in New York late Monday.

The dollar fell to 77.16 yen from 77.68 yen in New York.

Iron Ore-Shanghai rebar hits 1-month low on U.S. downgrade

Mon Aug 8, 2011 | By Reuters

* Shanghai rebar hits lowest since July 4
* Concerns over U.S. woes drag down rebar, iron ore swaps
* Iron ore traders still accessing impact of global rout

SHANGHAI, Aug 8 (Reuters) - Shanghai rebar futures fell over 1 percent to a more than one-month low on Monday as investors fretted about Standard & Poor's downgrade of the United State's top-tier credit rating, raising worries about a recession in the world's largest economy.

The most active January rebar futures contract on the Shanghai Futures Exchange traded down to 4,770 yuan ($741) on Monday, its lowest since July 4, and down 1.28 percent by the midday break from the previous close.

"Investors were frightened by the downgrade of the U.S. credit rating compounded by the euro zone's growing sovereign debt crisis, reversing the upward trend which was supported by high cost," said Jay Zhang, analyst with Everbright Futures.

Standard & Poor's cut the U.S. long-term rating by one notch from AAA on Friday on concerns about the nation's budget deficit and climbing debit burden, raising market concerns that the U.S. would slip into recession. Meanwhile, worries about the euro zone debt crisis continued spreading, further dampening global markets

A sharp fall in rebar prices has continued to weigh on prices of iron ore, the key steelmaking raw material, diluting buying interest among steel mills and traders in China, the world's top steel producer and iron ore buyer.

"The market has started to soften, but we are still evaluating the impact from the global rout later today," said an iron ore trader in coastal Shandong province.

Chinese steelmakers started to slow purchase of iron ore late last week after miners pushed up prices to as high as $190 per tonne including freight amid continued tightness of iron ore in India, the world's No. 3 exporter.

The Singapore Exchange-cleared iron ore swaps <0#SGXIOS:> extended losses last Friday due to a fragile outlook for the global economy.

Offers for Indian ore fines with 63.5 percent iron content stood steady at around $186-188, including freight, unchanged from last Friday, trading sources said.

Stockpiles of imported iron ore at major Chinese ports rose by 1 percent to reach a record 95.35 million tonnes by last Friday, with ore from top supplier Australia up 5.4 percent, while that from India slipped 1.2 percent and from Brazil down 5.7 percent.

India's Supreme Court partially lifted an iron ore mining ban imposed on July 29 in a key region of Karnataka state by allowing NMDC to mine up to 1 million tonnes per month of the steel-making ingredient from Aug. 6

Key global iron ore indexes, tracking spot deals in China and used by global miners to determine contract prices, were mixed last Friday, but still clung to their highest since mid-May.

Metal Bulletin Iron Ore Index .IO62-CNO=MB lost $1.12 to $177.45 a tonne, slightly off a nearly 2-month high on Thursday, and Platts 62-percent index IODBZ00-PLT fell $1.5 t0 $178 a tonne.

The Steel Index's 62-percent iron ore reference price .IO62-CNI=SI extended gains to $178 a tonne, up 10 cents from Thursday, its highest since May 17. ($1 = 6.440 Chinese Yuan)

European shares fall after US downgrade

Mon Aug 8, 2011 7:17am GMT

LONDON (Reuters) - European shares slipped on Monday continuing their two-week slide after Standard & Poor cut the U.S. prized AAA credit rating by one notch, with miners the worst performers.

But losses could be limited after the Group of Seven leaders said they were "ready to take action to ensure stability and liquidity in financial markets" and the European Central Bank is to extend its bond buying support.

Commodity stocks whose performance is dependent on a strong economic outlook were among the worst performers, with the STOXX Europe 600 Basic Resources index down 1.7 percent.

"The downgrade to the U.S. is not great. These markets are going to remain unsettled for a while, we had recommended investors to raise cash in anticipation of this volatility," Mike Lenhoff, chief strategist at Brewin Dolphin Securities, said.

"If the ECB is going to provide some support to the bond markets that could create some sort of relief, buying opportunities could emerge in the sold off cyclical areas, but we are looking for more stability first."

By 0710 GMT, the pan-European FTSEurofirst 300 index of top shares was down 0.3 percent at 972.55 points, having hit their lowest level since late May 2010.

(sourced Thomson Reuters)

Oil falls more than $2 after US credit rating

Mon Aug 8, 2011

By Manash Goswami

SINGAPORE (Reuters) - Crude fell more than $2 a barrel on Monday after rating agency Standard & Poor's downgraded the United States' top-tier credit rating, raising concerns on the outlook for demand in the world's biggest oil consumer.

U.S. oil fell as low as $83.68 a barrel and traded at $84.22 by 0143 GMT, posting losses for five of the last six trading sessions. Brent slumped as much as $106.20, the lowest since the close of June 27, and traded at $106.54.

Markets are on edge following the U.S. credit downgrade to AA-plus and fears of Europe being unable to battle a debt crisis and prevent it from spreading. Aiming to calm investors, the Group of Seven major industrialised nations expressed trust in U.S. Treasuries and steps by the European Central Bank to halt financial market contagion.

"The cost of borrowing will increase in the U.S. as a result of the downgrade," said Ken Hasegawa, a commodity derivatives manager at Japan's Newedge brokerage. "The U.S. will have to tighten money flow to reduce its deficit. That may lower consumption by people in the country, reducing oil demand."

Investors on Monday struggled to ascertain the impact of the downgrade on the financial system, from mortgages to banks to markets that rely on U.S. Treasuries for collateral.

NO RATING IMPACT ON ASIAN SOVEREIGNS

Standard and Poor's sought to assure global investors that its downgrade of the U.S. would have no immediate impact on sovereign borrowers in the Asia-Pacific. But the agency said a fresh global financial crisis could hurt some Asian sovereigns harder this time around.

Asian shares fell and the dollar languished near a record low against the Swiss franc, while gold powered to another record just short of $1,690 an ounce.

U.S. stock index futures opened sharply lower in the first trading in domestic equities after the downgrade on concerns the move was likely to raise borrowing costs for the American government, companies and consumers.

Many downplayed the likelihood of the sort of financial contagion experienced when Lehman Brothers went under in September 2008. Few had expected it to have to file for bankruptcy, and few were prepared for the fallout.

"Yes, the downgrade has some implications, no doubt about it," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney. "But it is one ratings agency, and it is nothing too much. The fall in prices is a knee-jerk reaction by Asia."

Japan's Finance Minister Yoshihiko Noda said that market trust in the dollar and U.S. Treasuries has not wavered in the wake of the downgrade.

U.S. Treasury debt is as safe as it was before the downgrade and Congress' "damaging" debate over raising the country's debt limit, Treasury Secretary Timothy Geithner said on Sunday. He also criticised the move.

U.S. 30-year long bond futures fell moderately at the start of electronic trade in Asia. The 30-year T-bond future fell 12/32 in price to 131-26/32.

In Europe, political and financial leaders gave their first sign of readiness to battle the debt crisis with the European Central Bank signalling it would start buying Italian and Spanish debt.

On Friday, Brent settled at $109.37 a barrel, slumping 6.3 percent for the week. U.S. oil settled at $86.88 a barrel, having bounced off a previous session trough of $82.87, the lowest since November 26, 2010.

Brent would revisit the August 5 low of $104.30 per barrel, as a medium-term downtrend is expected to develop more, while a bearish target at $81.35 is unchanged for U.S. oil as a wave "3" of a downward wave "C" has not been completed, according to Reuters technical analyst Wang Tao. (sourced Thomson Reuters)

Moody's warns Greek default almost certain

Mon Jul 25, 2011
By Ingrid Melander and George Georgiopoulos

ATHENS (Reuters) - Moody's cut Greece's credit rating further into junk territory on Monday and said it was almost certain to slap a default tag on its debt as a result of a new EU rescue package.

It was the second rating agency to warn of a default after euro zone leaders and banks agreed last week that the private sector would shoulder part of the burden of a rescue deal that offers Greece more cash and easier loan terms to keep it afloat and avoid further contagion.

"The announced EU programme along with the Institute of International Finance's statement implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100 percent," Moody's said in a statement. Bank lobby IIF, which led private sector negotiations, aims to attract 90 percent investor participation in the bond exchange plan which comes on top of the EU's new 109 billion euro bailout.

Moody's cut Greece's rating by three notches to Ca, just one notch above default, to reflect the expected loss implied by the proposed debt exchanges.

Greece now has the lowest rating of any country in the world covered by Moody's, which, like Fitch last week, said it would review Greece's rating after the debt swap is completed.

"Once the distressed exchange has been completed, Moody's will reassess Greece's rating to ensure that it reflects the risk associated with the country's new credit profile, including the potential for further debt restructurings," it said.

However, whereas Fitch pledged to quickly give Greece a higher, "low speculative grade" after its bonds had been exchanged, Moody's said it could not forecast when the rating would change or how.

"It all depends how quickly the debt exchange takes place," said Alastair Wilson, Moody's Managing Director for EMEA Credit Policy. "Once we have greater visibility over that, we will reassess the credit profile quite quickly. Whether the rating will change, that's a different question," he told Reuters.

A senior EU official said on Saturday that the aim was to start a voluntary swap of privately-held Greek bonds in late August and conclude it in early September.

Greek bank shares and the broader stock market were unfazed by Moody's action. Analysts said the downgrade and the default warning were priced in and less worrying following assurances provided by the EU deal.

"The EU Council last week effectively secured Greek banks' continued access to ECB liquidity, even in the case that PSI (private sector involvement) triggers a selective default," said Platon Monokroussos, an economist at EFG Eurobank.

The government has repeatedly criticised ratings firms for their downgrades and its spokesman threatened on Monday to end its subscriptions to these agencies as the new rescue package means Greece will not issue new bonds for years.

"All governments pay a subscription to these agencies. We, I think, do not need the reviews anymore. They have no practical value," Elias Mosialos told Radio 9. "Perhaps the finance ministry should end its subscription."

CONTAGION CONTAINED ... FOR NOW

Moody's said it would take into account the possibility of a second default while reassessing Greece's rating.

"Our experience is that relatively small restructurings have often been followed by deeper defaults," Wilson said, adding that he could not say if this would be the case for Greece.

The rescue package for Greece benefits other euro zone countries by containing near-term contagion risks but it was not necessarily positive in the longer run as it set a precedent for private sector involvement in rescue deals, Moody's said.

"The support package sets a precedent for future restructurings should the finances of another euro area sovereign become as problematic as those of Greece. The impact of Thursday's announcement for creditors of Ireland and Portugal is therefore likely to be credit-neutral," it said.

The cost of insuring most peripheral euro zone government debt against default rose on Monday on market doubts that the fresh aid package for Greece agreed last week will protect bigger economies from contagion.

Standard & Poor's and Fitch rate Greece CCC, broadly in line with Moody's rating. S&P has not yet said how the EU summit deal will affect Greece's rating.

(sourced Reuters)

Moody's reviews Nippon Steel Corp. ratings for possible downgrade

Apr 4, 2011 8:24am GMT

April 4 (Reuters) - Nippon Steel Corporation (5401.T: Quote)

* Moody's reviews Nippon Steel Corp. ratings for possible downgrade

(sourced Reuters)

Fitch says likely to downgrade Portugal if no bailout

Wed Mar 30, 2011 1:08pm BST

ATHENS (Reuters) - Fitch is likely to cut Portugal's credit rating soon if it does not ask for an EU/IMF bailout, while the EU's new bailout fund puts increased pressure on Greece's junk rating, the firm said on Wednesday.

In a report assessing the rating implication of last week's EU summit, Fitch also said that the main short-term risks to Ireland's sovereign rating remained the recession and possible additional bank support costs.

(Reporting by Ingrid Melander)

Moody's further downgrades six Greek banks, after credit rating of Greece

Wed, Mar09, 2011 19:16:04

ATHENS, March 9 (Xinhua) -- International credit rating agency Moody's proceeded Wednesday to the downgrade of six Greek banks, two days after reducing for once again over the past year the credit rating of Greece by three notches which caused a strong reaction by the Greek government.

This time the announcement did not come as a surprise in Athens and local bankers appear reassuring that the Greek banking sector which has also been hit by the severe debt crisis that broke out in late 2009 in the country, can stand the pressure.

Moody's downgraded with a negative outlook from Ba3 to Ba1 the National Bank of Greece, Eurobank, Alpha Bank and Piraeus Bank. Moreover, downgraded with negative outlook from Ba2 to B1 the Agricultural Bank of Greece and Attica Bank.

The agency argues that the decision was taken based on the latest assessment of the worsening credit rating of Greece which will have an impact on the sector, as well as the review of their financial strength and increasing challenges regarding liquidity.

Representatives of the Greek banking system reply that the sector can overcome the downgrade and the crisis through the 30 billion euro (41.67 billion U.S. dollars) guarantee aid package of the Greek state. They argue that despite the assessments by international rating agencies, the European Central Bank will continue to accept as normal Greek state bonds.

Moody's announcement that downgrades the credit rating of Greece from BA1 to B1 with a negative outlook Monday, due to doubts that the efforts under way to solve the crisis could prove inadequate to avoid an eventual restructure of the Greek debt, was strongly criticized by Athens.

The decision was "unbalanced and unjustified" and proves the need for better regulation of international ratings agencies, said the Greek Finance Ministry.