Markets are recovering some of the losses seen on Friday in a correctional move, after France lost its top credit rating while eight other European nations saw their credit ratings being cut by S&P on Friday, which determined investors to strongly head towards safe haven.
Standard & Poor’s mass debt rating cuts targeted nine of the euro zone’s 17 countries. France and Austria lost their AAA rating which fell to AA+, while Cyprus, Italy, Portugal and Spain were cut two grades and the long-term ratings on Malta, Slovakia and Slovenia were also downgraded.
S&P also added it is considering to downgrade the euro zone’s bailout fund, fueling believes that the financial turmoil might intensify as conditions in Europe may deteriorate further while the efforts to solve the debt crisis may be derailed, threatening the outlook for the global recovery.
Following S&P’s decision, German Chancellor Angela Merkel confirmed over the weekend the need to “speed up plans to introduce measures for greater fiscal unity within the euro zone”, while European leaders will race this week trying to rescue their efforts to save Greece and implement new fiscal rules.
Adding to nervousness was the fact that talks between Greek officials and creditors stalled last week on disagreements over the size of the losses raising the fears of default. These developments brought looses in Asia today where Nikkei 225 fell 1.43% while Hang Seng fell 1.00%.
While the U.S. markets will be closed on Monday for Martin Luther King holiday, and economic data is absent today from Europe, markets will closely follow France’s 8.7 billion euros bills auction later today, while Nicolas Sarkozy will meet Spanish Prime Minister Mariano in Madrid.
Some relief was fueled by Germany’s ability to keep its top-notch AAA rating and a stable outlook, while Belgium, the Netherlands, Finland, Ireland, Estonia and Luxembourg had their ratings affirmed. This helped European shares to start the week with some gains where DAX rose 0.37% while FTSE 100 gained 0.06%.
The euro recovered some of Friday’s losses trading around 1.2260, while the pound is around 1.5325. The dollar index is weakening trading around 81.45 after rising as high as 81.77 on Friday. The AUD rose today trading around 1.0310 while the yen strengthened trading around 76.80 from 77.05 opening.
After falling as low as $97.68 on worries over Europe, oil is trading as of this writing around $99.35 after the ECB said it will do all it can to calm the situation after S&P’s mass downgrade. Gold also recovered today trading around $1643.00 from the opening at $1634.30.