Exchanges react with moderate declines to the warning of Standard & Poor's

The international rating agency Standard & Poor’s dealt a new blow to investors’ confidence in the Eurozone area by announcing on Monday evening that it will put the 15 countries within the monetary union on review for a possible downgrade. In the early trading session, the European, US and Asian markets registered declines but gradually managed to recover the losses and some of the main indices resumed their positive levels.

The six AAA rated countries in the Eurzone - Germany, France, Luxembourg, Austria, Finland and the Netherlands - are among the nations to be placed on a negative outlook and their credit ratings may be lowered. The rating of the other nine members of the single currency union may be downgraded by two notches, warned S&P. The rating agency’s decision came a couple of days before the summit of EU leaders in Brussels on December 8-9 where they should present a plan for a recovery from the debt crisis.

According to Bloomberg’s estimates, if things come to downgrading the ratings of all the 15 Eurozone countries, a sovereign debt totalling $8.1 trln will be affected. Financial analysts commented that a change of the outlook would be disastrous for Europe and would exert a huge pressure on the Euro.

Today, the Euro lost merely 0.25% against the US dollar to $1.3371. In early trading, the drop was 0.3-0.4% to $1.3368. At the end of the day, the Euro dipped more quickly after it became clear that S&P’s could also downgrade the rating of the European Financial Stability Fund, aimed at rescuing troubled countries.

Markets were most surprised at the warning against Germany whose AAA rating has not been threatened until now. All news and media headlines usually affect the Euro but only in the short term. The most important thing is the summit of the EU leaders at the end of the week, financial analysts commented.

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