After several weeks of speculation – and one “erroneous” press release in November — Standard & Poor’s finally did what was widely expected and downgraded France’s AAA rating one notch, to AA+. Earlier on Friday afternoon, the first “official” word of S&P’s downgrade of France came from French Finance Minister Francois Baroin, who spoke on French TV.
Said S&P in a statement accompanying the rating change: “The downgrade reflects our opinion of the impact of deepening political, financial, and monetary problems within the eurozone.” The rating agency removed France from its CreditWatch list, but left its outlook as negative.
Speculation was high all day on Friday that S&P would finally move to lower the ratings of several eurozone countries after various officials made off-the-record comments about the looming downgrades. An EU official had told Bloomberg that Italy’s rating was getting cut by two notches, from A to BBB+.
Germany was reported to be keeping its pristine AAA rating.
The major U.S. indexes didn’t react dramatically as the news of the downgrades grew more certain on Friday afternoon. After being down over 100 points earlier, partly on the poor earnings report by JPMorgan Chase (NYSE:JPM), the Dow Jones Industrials closed down around 50 points.
As it typically does, S&P waited for trading in the New York markets to close before announcing the new ratings.