GLOBAL MARKETS: Financial Markets Shrug Off France Downgrade - Wall Street Journal

By Nina Bains European stocks weakened only modestly on Moody's decision to strip France of its coveted triple-A credit rating Tuesday, while the euro recovered some earlier losses against the dollar and French government bonds were little changed as investors fixed their gaze on an upcoming meeting of euro-zone finance ministers. Moody's Investors Service stripped France of its triple-A rating, mirroring a move by Standard & Poor's Ratings Services in January. Moody's cut France's rating to Aa1 from Aaa, keeping a negative outlook on the rating. "As a consequence, the European Financial Stability Facility may also be downgraded in the coming days," said Dominique Barbet, senior economist at BNP Paribas. "However, the European Stability Mechanism, which has a very different structure, may retain its AAA rating for the time being." This comes ahead of a sale of new euro-denominated bonds with a three-year maturity by the EFSF bailout fund Tuesday. After an hour of trading, French stocks were down 0.6%, the euro was down a quarter of a cent from late New York trading Monday, the 10-year Spanish bond yield was up three basis points and the cost of protecting French government debt against a default rose by four basis points. However, the focus remained on the Eurogroup meeting centering on the payment of Greece's next aid tranche. Greece's international creditors are said to be examining the possibility of extending a moratorium on repayments for Greece by 10 years to 2032, as well as accelerating the release of emergency funds to finance a debt buyback, officials familiar with the situation told Dow Jones Newswires Monday. Also said to be under discussion is a sharp cut in the interest rate payable on 53 billion euros ($68 billion) of loans made by European countries under Greece's first bailout program in 2010. Greece, meanwhile, has pushed through last-minute reforms in a bid to clear the way for the next disbursement of EUR31.5 billion in financial aid at the meeting. "What remains unclear is whether the euro-zone finance ministers will be able to reach a compromise on measures needed to achieve Greek debt sustainability over long term," said Valentin Marinov, head of European G10 FX strategy at Citigroup. "With euro-zone officials resisting calls for restructuring, we think that Greek debt sustainability will remain an issue and could limit the positive impact on the single currency in the immediate aftermath of the meeting." In the foreign exchanges, the yen was steady against the dollar as expectations for further Bank of Japan easing of monetary policy remained intact for the December meeting, even as the central bank maintained its policy this month. In corporate news, Credit Suisse stock fell after it announced it will reorganize its business. The revamp involves combining its asset management unit with its private bank to create a wealth management division, which would result in a new executive board structure. Carrefour SA is selling its 60% stake in Carrefour Indonesia to its local partner CT Corp. in a deal valued at EUR525 million. Spain auctions Treasury bills in the session, ahead of a Spanish bond auction Thursday and the U.S. releases figures on housing starts and building permits. There's also an important speech scheduled by Federal Reserve chairman Ben Bernanke, which will be watched for hints on the future course of U.S. monetary policy. Latest Price Change From Previous Close FTSE 100 5722.57 -0.3% DAX 7122.85 0.0% CAC-40 3426.43 -0.4% Stoxx Europe 600 268.03 -0.2% Hang Seng 21228.20 -0.2% Nikkei 225 9142.64 -0.1% Shanghai Composite 2008.92 -0.2% Dow Jones Industrials 12795.90 S&P 500 1386.89 Level In Late New York Trading (Previous Session) EUR/USD 1.2802 1.2813 USD/JPY 81.21 81.41 Change From Previous Close Dec. German Bund Future 143.05 +0.05 10-Yr French Bond Yield 2.09% +0.02 Jan. Nymex Crude Oil 88.80 -0.48 Jan. Brent Crude Oil 111.13 -0.57 Gold 1733.90 -0.90 Write to Nina Bains at nina.bains@dowjones.com via Business - Google News

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