Lack of market response to S&P downgrades raises questions

Monday, 23 January 2012 00:00 - - {{hitsCtrl.values.hits}}

PARIS: Financial markets that waited a month for eurozone sovereign debt downgrades quickly ignored the news from Standard & Poor’s once it came, raising the question of just how pertinent international ratings agencies are.

Aside from a couple of jittery hours on Friday the 13th, investors took the downgrades of nine eurozone countries in their stride, and most of those concerned did not appear to have suffered much, if at all, from the development.

Stock markets in London and Frankfurt posted four straight sessions of gains before giving up a bit of ground on Friday as investors locked in gains ahead of the weekend.

On government bond markets, Spain and Italy found that the rates they had to offer to borrow money had stabilized and declined respectively, even though both suffered two-notch S&P downgrades.

In fact, all of the downgraded countries that sought to borrow money last week were able to do so at better rates than before the hatchet fell. (AFP)

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