Sun, Oct 21, 2012 - Page 15 News List

Spain debt rating, US economic report boost EU markets

Bloomberg

European stocks climbed this week as Moody’s Investors Service reiterated its investment-grade debt rating on Spain following a review and US reports on retail sales, manufacturing and house building beat estimates.

ArcelorMittal advanced 9.8 percent after a report said the steelmaker is considering the sale of a minority stake in its Canadian iron ore unit. Remy Cointreau SA slumped 9.3 percent after France’s second-biggest distiller posted an improvement in first-half sales that trailed analysts’ projections.

The STOXX Europe 600 Index climbed 1.7 percent to 274.08 this past week, after dropping 1.7 percent the previous week. The equity benchmark has rallied 17 percent from this year’s low on June 4 as European Central Bank (ECB) policymakers approved an unlimited bond buying program and the US Federal Reserve announced a third round of quantitative easing.

“The rating assessment of Spain at the beginning of the week certainly gave the market a positive shove,” said Christian Zogg, who manages about US$540 million as head of equity and fixed income at LLB Asset Management AG in Vaduz, Liechtenstein. “The US data turned out to be good news as well. The market may hold rather well until the end of the year; one just needs to endure the volatility.”

National benchmark indexes gained in every Western European market except Norway and Iceland this past week. Germany’s DAX advanced 2 percent, while the UK’s FTSE 100 added 1.8 percent. France’s CAC 40 and Spain’s IBEX 35 each rallied 3.4 percent.

Moody’s decided against removing Spain’s investment-grade credit rating on Tuesday. The ratings company said that the risk of the country losing access to credit markets has fallen because the ECB now has the power to buy its debt. Moody’s assigned a negative outlook on Spain’s bonds as it concluded a review that it began in June.

Cyprus, Portugal, Ireland and Greece all have ratings below investment grade. S&P has a negative outlook on its “BBB-” rating for Spain, while Fitch Ratings has given the country a “BBB” score, two levels higher than junk.

EU leaders agreed on a timetable to introduce common regulation of the eurozone’s 6,000 lenders by Jan. 1, 2014. At a two-day summit, the 27 member states decided to put in place the framework for the ECB to move to oversee all the banks in the currency area next year.

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