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BusinessDesk: Major credit rating agencies all disappointed with last week's EU summit

BusinessDesk: Major credit rating agencies all disappointed with last week's EU summit

The weekend failed to make the agreement reached at the European Union summit last Friday more palatable. On the contrary, investors were reminded by credit rating agencies that the euro zone's credit troubles are far from over.

Major credit rating agencies Moody’s Investors Service, Standard & Poor's and Fitch Ratings have all expressed disappointment with the results of last week's summit.

Moody’s said it will review the ratings of all EU countries in the first quarter, saying the summit failed to produce “decisive policy measures” to solve the debt crisis.

Moody's warning comes hot on the heels of similar comments last week by S&P, which might announce the results of its review as early as this week.

France's credit rating is widely considered most at risk.

In afternoon trading in New York, the Dow Jones Industrial Average fell 1.84 percent, the Standard & Poor's 500 Index dropped 2.11 percent and the Nasdaq Composite Index declined 1.87 percent. In Europe, the Stoxx 600 Index shed 1.9 percent.

The euro suffered, dropping 1.5 percent to US$1.3235 by midday trading in New York and falling 1.2 percent to 102.65 yen.

Italy sold 7 billion euros of 12-month Treasury bills at an average yield of 5.952 percent, compared with 6.087 percent at the previous auction of the securities on November 10, according to Bloomberg News. Demand from investors declined to 1.92 times the amount on offer from 1.99.

"It appears that Europe's nightmare has not gone away after all, with investors rethinking Friday's immediately positive response," Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York, told Reuters.

Across the pond, Intel added to a general sense of concern about the global economy and corporate profits as the world's largest chip maker slashed its forecast for fourth-quarter revenue because of hard disk drive supply shortages.

After several profit warnings last week including by rival Texas Instruments, Intel was next in line. The company said it now expects revenue to be US$13.7 billion, plus or minus US$300 million, compared with a previous estimate of US$14.7 billion, give or take US$500 million. Analysts predicted US$14.7 billion, the average of estimates compiled by Bloomberg News.

Hendi Susanto, research analyst at Gabeli & Co, told Reuters he was not surprised Intel had cut its outlook, given that Texas Instruments last week reduced its fourth-quarter forecast.

"It's temporary. Most people are expecting the hard disk drive supply will be constrained until at least the end of second quarter 2012," Susanto said.

Meanwhile, the Organisation for Economic Cooperation and Development today said that all major economies were losing momentum.

The OECD's October composite leading indicator (CLI) for its member states dropped to its weakest level since November 2009, falling to 100.1 from 100.4 in September.

There were bright spots. OECD economist Gyorgy Gyomai, who heads the unit in charge of CLIs, said a slowing pace of decline in Canada, China, Russia, Japan and the US was a positive sign and contrasted with ongoing weakness in the euro zone.

"We have really mild indications that for these countries the downward trend may be breaking," he told Reuters.


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Days to the General Election: 27
See Party Policies here. Party Lists here.