Comment: European Elections, Fitch Updates Greek and Spanish Credit Ratings
May 23, 2014 6:48 am
European stock markets fell Friday, erasing previous session gains amid caution as EU elections kick-off, with some underwhelming German IFO data dampening the mood further. EU elections today – people in the region head to the polls to cast votes.
Since the last election in 2009, we’ve had a euro-wide debt crisis, bailouts, austerity measures and ECB action. Much has changed over the past five years in the euro zone, as right-wing anti-euro parties have fast become the by-product of the crisis. This time around, there’s concerns that Brussels will lose its grip and influence on the wider EU, with countries such as the UK showing hesitation regarding further inclusion into EU-driven policies.
At the same time, we have Ukrainian elections on Sunday which prompt some nerves, though the withdrawal of forces by Russia this week has been seen as sign of de-escalation of the crisis, so markets are exhibiting less discomfort than usual. What is a little more worrying for global investors – particularly those with a strong focus in Asian assets – is the military coup in Thailand which is dominating the headlines.
With the long holiday weekend in most parts of Europe, traders are taking no chances, cutting down exposure to risk, with disappointing German IFO data denting the mood further. Like the ZEW survey out of Germany last week which fell short of expectations, the IFO survey reached its lowest level of the year in May. The survey’s “business climate” component fell to 110.4, down from 111.2 in April, and just under the 110.9 predicted by economists. The current conditions component was a little better but the forward looking component declined – clearly the weaker run of German macro data seems to be one of the drivers behind the recent dovish stance taken by the Bundesbank who have now endorsed a broader stimulus approach by the ECB next month.
Elsewhere, on a brighter note, Greece’s credit rating was increased by Fitch Ratings with its long-term debt to B, five levels below investment grade, from B-. Fitch said that’s due to an improving economic and fiscal outlook for the country that sparked the euro area’s sovereign-debt crisis. Meanwhile, S&P Ratings upgraded Spain’s rating one level to BBB from BBB-. Looking ahead, we have US new home sales data which will be eyed eagerly.
European stock markets fell Friday, erasing previous session gains amid caution as EU elections kick-off, with some underwhelming German IFO data dampening the mood further.
EU elections today – people in the region head to the polls to cast votes.
Since the last election in 2009, we’ve had a euro-wide debt crisis, bailouts, austerity measures and ECB action. Much has changed over the past five years in the euro zone, as right-wing anti-euro parties have fast become the by-product of the crisis. This time around, there’s concerns that Brussels will lose its grip and influence on the wider EU, with countries such as the UK showing hesitation regarding further inclusion into EU-driven policies.
At the same time, we have Ukrainian elections on Sunday which prompt some nerves, though the withdrawal of forces by Russia this week has been seen as sign of de-escalation of the crisis, so markets are exhibiting less discomfort than usual. What is a little more worrying for global investors – particularly those with a strong focus in Asian assets – is the military coup in Thailand which is dominating the headlines.
With the long holiday weekend in most parts of Europe, traders are taking no chances, cutting down exposure to risk, with disappointing German IFO data denting the mood further. Like the ZEW survey out of Germany last week which fell short of expectations, the IFO survey reached its lowest level of the year in May. The survey’s “business climate” component fell to 110.4, down from 111.2 in April, and just under the 110.9 predicted by economists. The current conditions component was a little better but the forward looking component declined – clearly the weaker run of German macro data seems to be one of the drivers behind the recent dovish stance taken by the Bundesbank who have now endorsed a broader stimulus approach by the ECB next month.
Elsewhere, on a brighter note, Greece’s credit rating was increased by Fitch Ratings with its long-term debt to B, five levels below investment grade, from B-. Fitch said that’s due to an improving economic and fiscal outlook for the country that sparked the euro area’s sovereign-debt crisis. Meanwhile, S&P Ratings upgraded Spain’s rating one level to BBB from BBB-. Looking ahead, we have US new home sales data which will be eyed eagerly.
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