Markets in Europe Little Moved by French Downgrade

Analysts said that markets were watching a flurry of activity in the coming days ahead of the European Union’s next big summit meeting, which is to be held Jan. 30 in Brussels. Much of the attention is focused on Greece, where talks on the amount by which private-sector lenders would write down the value of their Greek bond-holdings broke down last Friday.

Greek officials were traveling to Washington on Monday for debt talks, according to Reuters, while the so-called troika of international lenders — officials from the E.U., the International Monetary Fund and the European Central Bank — was due to return to Athens on Tuesday. The Institute of International Finance, which was negotiating on behalf of private holders of Greek debt, was to resume talks by midweek.

The Greek prime minister, Lucas Papademos, told CNBC television in an interview
broadcast Monday that “the next few weeks are particularly challenging.” Officials must both conclude discussions with private investors while formulating “a new economic adjustment program for the period 2012-2015” in light of Greece’s worsening budget figures, so as to meet conditions set by the troika for new bailout loans.

Mr. Papademos said the goal was to have both worked out “over the next two to three weeks.”

“The progress or otherwise of these negotiations will probably dictate how the market trades over the next few weeks,” said Gary Jenkins, a director of Swordfish Research, according to The Associated Press.

Also Monday, the French president, Nicolas Sarkozy, was in Madrid for talks with the Spanish government, while Herman Van Rompuy, the president of the European Council, was meeting with Prime Minister Mario Monti of Italy in Rome.

The decision by Standard Poor’s late Friday to cut France’s AAA credit rating by one notch had been widely expected. The agency cited a deteriorating economic situation and disappointment with leaders’ efforts to address the euro crisis. S.P. also cut Austria, Italy and six other European countries.

Moody’s Investors Service, a rival to S.P., on Monday said it was maintaining its own rating of France at AAA for the time being, with the results of a review that is currently under way to be announced before April.

In afternoon trading, the Euro Stoxx 50 index, a barometer of euro zone blue chips, and the FTSE 100 index in London were little changed.

French 10-year bonds were unchanged at 3.05 percent. Italian 10 year bonds were yielding 6.65 percent, up 5 basis points, while Spanish 10-years were yielding 5.16 percent, up 1 basis points. A basis point is one-hundredth of a percent.

Reuters cited unidentified traders as saying the European Central Bank had intervened in the secondary bond market again, buying Italian and Spanish securities to relieve some pressure on yield.

German 10-year bonds, the European benchmark, were unchanged, trading to yield 1.76 percent.

U.S. equity index futures fell modestly. Wall Street markets were closed Monday for the Martin Luther King Jr. holiday. The Dow Jones industrial average fell 0.4 percent on Friday.

The dollar was mixed against other major currencies. The euro ticked up to $1.2658 from $1.2656 late Friday in New York, while the British pound fell to $1.5303 from $1.5317. The dollar fell to 76.80 yen from 76.97 yen, but gained to 0.9535 Swiss francs from 0.9524 francs.

Asian shares were broadly lower. The Tokyo benchmark Nikkei 225 stock average fell 1.4 percent. The Sydney market index S.P./ASX 200 fell 1.2 percent. In Hong Kong, the Hang Seng index fell 1 percent and in Shanghai the composite index declined by 1.7 percent.

Article source: http://www.nytimes.com/2012/01/17/business/global/daily-stock-market-activity.html?partner=rss&emc=rss