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Tag Archives: Moody's
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Moody’s lowers UK’s outlook to negative
London
CNN Business
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Moody’s Investor Service on Friday changed the United Kingdom government’s ratings outlook to “negative” from “stable.”
Moody’s attributed the change in the outlook to “heightened unpredictability in policymaking amid weaker growth prospects and high inflation; and risks to the UK’s debt affordability from likely higher borrowing and risk of a sustained weakening in policy credibility.”
However, the ratings agency affirmed the country’s credit rating. The affirmation of the Aa3 rating is a reflection of the UK’s economic resilience, Moody’s said in a statement.
Credit ratings are essentially credit scores for governments and companies. They express an opinion about the capacity and willingness of large borrowers to repay their debts. Germany, Canada, Switzerland, Australia and the United States have some of the best credit ratings in the world, while Argentina, Nigeria, Pakistan and India have some of the lowest ratings.
The UK is in the midst of suffering from a string of blows to its economy, which the Bank of England has said may already be in recession. Soaring food costs drove the annual rate of inflation to 10.1% in September, returning it to July’s 40-year high.
That may prompt the central bank to hike interest rates more aggressively when it meets on November 3 in order to tame rising prices.
On Thursday, Liz Truss resigned as Prime Minister after six disastrous weeks in office. Truss and former Finance Minister Kwasi Kwarteng’s “mini” budget upended UK financial markets. Investors immediately rejected their plans for unfunded tax cuts, spiking government bond yields, sinking the pound and forcing the Bank of England to make three successive interventions to rescue overstretched pension funds.
While most of those measures have since been rescinded by Britain’s new Finance Minister Jeremy Hunt — calming markets and restoring a sense of stability — the government’s credibility has been damaged and volatility could persist.
As well as driving up borrowing costs for the government and adding pressure to public spending, any credit ratings downgrade would only weaken investor appetite for UK assets.
The last time Moody’s downgraded the United Kingdom’s credit rating was in October 2020, citing lower than expected growth following Brexit, rising government debt and a weakening of the UK’s institutions that it said had led to a “fractious policy environment.”
— Julia Horowitz and Alicia Wallace contributed to this report.
Fitch, Moody’s slash Russia’s sovereign rating to junk
March 3 (Reuters) – Ratings agencies Fitch and Moody’s downgraded Russia by six notches to “junk” status, saying Western sanctions threw into doubt its ability to service debt and would weaken the economy.
Russia’s financial markets have been thrown into turmoil by sanctions imposed over its invasion of Ukraine, the biggest attack on a European state since World War Two. read more
The invasion has triggered a flurry of credit rating moves and dire warnings about the impact on Russia’s economy. S&P lowered Russia’s rating to junk status last week.
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It also prompted index providers FTSE Russell and MSCI to announce on Wednesday that they will remove Russian equities from all their indexes, after a top MSCI executive earlier this week called Russia’s stock market “uninvestable”. read more
FTSE Russell said the decision will be effective from March 7, while MSCI said its decision will be implemented in one step across all MSCI indexes as of the close on March 9. MSCI said it is also reclassifying MSCI Russia Indexes from emerging markets to standalone markets status.
Russia (.MIRU00000PUS) has a weighting of 3.24% in MSCI’s emerging market benchmark (.MSCIEF) and a weighting of around 30 basis points in the index provider’s global benchmark (.MIWD00000PUS).
The Institute of International Finance predicts a double-digit contraction in economic growth this year. read more
Fitch downgraded Russia to “B” from “BBB” and placed the country’s ratings on “rating watch negative”. Moody’s, which last week had flagged the possibility of a downgrade, also cut the country’s rating by six notches, to B3 from Baa3.
Fitch said the only other precedent to such a large six-notch downgrade on a single sovereign entity was South Korea in 1997.
“The severity of international sanctions in response to Russia’s military invasion of Ukraine has heightened macro-financial stability risks, represents a huge shock to Russia’s credit fundamentals and could undermine its willingness to service government debt,” Fitch said in a report.
Fitch said that U.S. and EU sanctions prohibiting any transactions with the Central Bank of Russia would have a “much larger impact on Russia’s credit fundamentals than any previous sanctions,” rendering much of Russia’s international reserves unusable for FX intervention.
“The sanctions could also weigh on Russia’s willingness to repay debt,” Fitch warned. “President Putin’s response to put nuclear forces on high alert appears to diminish the prospect of him changing course on Ukraine to the degree required to reverse rapidly tightening sanctions.”
Fitch said it expects further ratcheting up of sanctions on Russian banks.
Moody’s said on Thursday the scope and severity of the sanctions “have gone beyond Moody’s initial expectations and will have material credit implications.”
The sanctions imposed by Western countries will also markedly weaken Russia’s GDP growth potential relative to the ratings agency’s previous assessment of 1.6%, Fitch said.
“In this case, the sanctions-driven frozen/falling assets tail-wagged the ratings dog,” analysts at Mizuho wrote. They added that “ratings and benchmark risks revealed may compound further capital exodus as benchmark funds are forced to liquidate rather than hold.”
Sanctions imposed on Russia have significantly increased the chance of the country’s defaulting on its dollar and other international market government debt, analysts at JPMorgan and elsewhere said on Wednesday. read more
Russia has responded to the sanctions with a range of measures to shore up its economic defenses and retaliate against Western restrictions. It hiked its main lending rate to 20%, banned Russian brokers from selling securities held by foreigners, ordered exporting companies to buttress the rouble, and said it would stop foreign investors selling assets. read more
The government also plans to tap its National Wealth Fund (NWF), a rainy day cushion, to help counter sanctions. read more
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Reporting by Mehr Bedi in Bengaluru and Megan Davies in New York; Additional reporting by Andrew Galbraith in Shanghai and Vidya Ranganathan in Singapore; Editing by Leslie Adler and Stephen Coates
Our Standards: The Thomson Reuters Trust Principles.
S&P cuts Russia’s rating to junk, Moody’s issues junk warning
Here are your FOX Business headlines.
Russia’s invasion of Ukraine triggered a flurry of credit rating moves on Friday, with S&P lowering Russia’s rating to ‘junk’ status, Moody’s putting it on review for a downgrade to junk, and S&P and Fitch swiftly cutting Ukraine on default worries.
Both countries’ financial markets have unsurprisingly been thrown into turmoil by this week’s events, which rank as the biggest military attack in Europe since World War Two, bringing stiff Western sanctions on Moscow.
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S&P lowered Russia’s long-term foreign currency credit rating to ‘BB+’ from ‘BBB-‘, and warned it could lower ratings further, after getting more clarity on the macroeconomic repercussions of the sanctions.
“In our view, the sanctions announced to date could carry significant negative implications for the Russian banking sector’s ability to act as a financial intermediary for international trade, S&P said.
FILE PHOTO: Signage is seen outside the Moody’s Corporation headquarters in Manhattan, New York. REUTERS/Andrew Kelly (REUTERS/Andrew Kelly / Reuters Photos)
It also cut Ukraine’s rating to ‘B-‘ from ‘B’.
Russia now has an “investment grade” rating of Baa3 from Moody’s and an equivalent BBB- from Fitch, due to one of the lowest debt levels in the world at just 20% of GDP, and nearly $650 billion of currency reserves.
RUSSIA INVADES UKRAINE: LIVE UPDATES
A downgrade, however, would lower that rating to the riskier “junk” or sub-investment grade category.
“The decision to place the ratings on review for downgrade reflects the negative credit implications for Russia’s credit profile from the additional and more severe sanctions being imposed,” Moody’s said in a statement.
Sovereign rating reviews can take months but this time are likely to be quicker.
WASHINGTON, DC – FEBRUARY 22: U.S. President Joe Biden delivers remarks on developments in Ukraine and Russia, and announces sanctions against Russia, from the East Room of the White House February 22, 2022 in Washington, DC. (Photo by Drew Angerer/G (Photo by Drew Angerer/Getty Images / Getty Images)
Moody’s said its decision would factor in the scale of the conflict and the severity of additional Western sanctions, which have already hit some of Russia’s top banks, military exports and members of President Vladimir Putin’s inner circle.
It added it would also weigh the degree to which Russia’s substantial currency reserves are able to mitigate the disruption stemming from the new sanctions and lengthy conflict.
CHINESE BANKS RESTRICT LENDING TO RUSSIA, DEALING BLOW TO MOSCOW
“Moody’s will look to conclude the review when these credit implications become more clear, particularly when the impact of further sanctions takes shape in the coming days or weeks,” it said.
Moody’s also put Ukraine’s already-junk “B3” rating on review for a downgrade.
In this image made from video released by the Russian Presidential Press Service, Russian President Vladimir Putin addressees the nation in Moscow, Russia, Thursday, Feb. 24, 2022. (Russian Presidential Press Service via AP) (Russian Presidential Press Service via AP / AP Newsroom)
Fitch did not wait, however, and moved immediately to slash its Ukraine rating by a whole three notches to “CCC” from “B.”
It explained, “There is a high likelihood of an extended period of political instability, with regime change a likely objective of President Putin, creating heightened policy uncertainty and potentially also undermining the willingness of Ukraine to repay debt.”
Moody’s had also warned a heavy conflict could leave Kyiv struggling to make debt payments.
RUSSIA’S INVASION AFFECTS BILLIONS IN UKRAINE-CHINA TRADE
Scope, a smaller European rating agency, has estimated Ukrainian government debt could jump above 90% of GDP by 2024 from about 50% now while S&P Global also warned on Friday of a spate of downgrades as a result of the war.
The International Monetary Fund is exploring all options to aid Ukraine with further financial support, said its head, Kristalina Georgieva.
Russia’s central bank has beefed up its banking sector with billions in additional foreign exchange and rouble liquidity, while the government has separately pledged full-scale support to sanctions-hit companies.
It is not the first time Russia is being cut to junk. Moody’s and S&P both took similar steps in early 2015 after the annexation of Crimea and plunging oil prices caused a rouble currency crisis.
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There are “serious concerns” around Russia’s ability to manage the disruptive impact of new sanctions on its economy, public finances and financial system, Moody’s said on Friday.
(Reporting by Marc Jones in London, Mehr Bedi and Bhargav Acharya in Bengaluru; Editing by Sam Holmes and Clarence Fernandez)
Disney, HubSpot, Cloudflare, Coherent: What to Watch When the Stock Market Opens Today
Here’s what we’re watching ahead of Friday’s trading action.
—U.S. stock futures edged lower Friday, putting the S&P 500 on track to end the week with muted gains after notching its ninth record closing high for 2021.
Futures tied to the S&P 500 slipped 0.3%, pointing to a drop after the opening bell. Contracts linked to the Nasdaq-100 Index edged down 0.3%, suggesting that technology stocks may also slip. Read our full market wrap.
What’s Coming Up
—The University of Michigan’s consumer sentiment index for the opening weeks of February, due at 10 a.m. ET, is expected to inch up to 80.8 from 79.0 at the end of January.
Market Movers to Watch
—All hail Baby Yoda. Walt Disney shares were up 0.9% ahead of the bell after the entertainment giant reported a first-quarter profit, as its flagship streaming service, Disney+, added more than 21 million new subscribers during the period. But the pandemic continued to zap results in the company’s movie-distribution and theme-park segments.