Eurozone crisis live: Spain downgrade ups bailout pressure

8.16am:

Reaction to S&P’s Spanish downgrade

S&P said the downgrade “reflects our view of mounting risks to Spain’s public finances, due to rising economic and political pressures. In our view, the capacity of Spain’s political institutions (both domestic and multilateral) to deal with the severe challenges posed by the current economic and financial crisis is declining.”

The move brought S&P into line with Moody’s, which downgraded Spain in June and has the country on review for a further downgrade to junk status.

On the foreign exchanges the euro suffered an early slide of 0.5% to $1.2825 in response, a larger fall than might have been expected given that S&P has merely moved into line with Moody’s.

Some early reaction to the Spanish downgrade from Stan Shamu, market strategist at IG Markets:

Analysts are starting to feel the Spain downgrade is a positive for markets as it might result in a spike in Spanish yields and force Spain’s hand to request a bailout. This seems to be what market participants want to see as it would activate the OMT* programme.

*OMT - outright monetary transactions - is the ECB’s plan to buy government bonds of the region’s troubled nations

8.13am:

Carrefour

Here’s more detail on the Carrefour figures from Reuters.

7.53am:

S&P downgrade raises pressure on Spain

Good morning and welcome to our rolling coverage of the eurozone crisis and global economy.

Spain will be in focus this morning after ratings agency S&P downgraded the country’s credit rating to BBB-minus - one notch above junk status - with a “negative outlook.” This ups the pressure on prime minster Mariano Rajoy and his government to accept rescue funds from Brussels and will certainly give them plenty to talk about at their cabinet meeting in a couple of hours’ time.

In Tokyo the International Monetary Fund’s Christine Lagarde has called on governments to co-operate to heal the fractured global economy or risk a further slowdown in economic growth.

In a speech to the IMF’s annual meeting in Tokyo, she warned that only with greater co-operation and courage could governments hope to prevent a repeat of the financial crisis. Here’s the full story from economics correspondent Phillip Inman.

Meanwhile the backlash against BAE Systems continues after the collapse of the €35bn (£28bn) mega-merger with Airbus-make EADS. German Chancellor Angela Merkel is getting quite a bit of the blame and we’ll have a round-up of the coverage later.

BAE pushed out a trading statement at 7am, saying it was trading in line with expectations but noting that it faces uncertainty in the key US market.
 
 “Uncertainty as to how US federal deficit reduction will be implemented, including possible sequestration measures, continues to cloud the outlook for the US government defence budget. Some limited trading disruption is likely in the last quarter of the 2012 calendar year as the US government operates under a Continuing Resolution from 1 October 2012.”

There’s been some encouraging news on the European corporate front this morning - the supermarkets group Carrefour has beaten analysts’ expectations and says it’s doing well in its home market of France. The world’s second-largest retailer, Carrefour is benefitting from strong sales growth in Asia and Latin America, particularly Brazil. Sales have slowed in southern Europe, which is hardly a surprise, and trading there remains a challenge, the group said.

This article was written by Fiona Walsh, for guardian.co.uk on Thursday 11th October 2012 08.16 Europe/London

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