Reuters Insider - Inside the News: Portugal Warning Signals Credit Disparity
13/06/2016 11:02
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Source: Thomson Reuters
Description: Rating agencies and bond markets are just
beginning to discriminate between credit risks
within the euro zone, according to IHS Global
Insight's Jan Randolph.
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Transcript (May be auto-generated)
It's 1200 GMT. Appetite for risky assets stabilizes as China backs Europe's
plans to tackle its debt problems; and North Korea promises to let the UN
inspect its nuclear facilities. European shares hit a 27-month high in thin
holiday trade. Record high copper prices help mining stocks. They also get a
boost by the Aussie mining tax target taking another step in the miner's favor.
Shares in Dutch group DSM are up 4% after the world's largest vitamin maker says
it's buying US baby foods ingredients maker Martek Biosciences for $1.1 billion.
A similar picture on Wall Street where futures are pointing to a higher open.
Adobe in focus there after a surprisingly up earnings forecast after hours on
Monday. Optimism tempered though after Moody's says it may cut Portugal's A1
ratings sometime in the next three months. The Euro pares gains against the
Dollar and hits a fresh all-time low against the Swiss Franc. Portugal's CDS
rises after that Moody's ratings warning. IHS Global Insight's Jan Randolph says
markets shouldn't be too surprised by the move. In a sense, the rating is
convergent. So the last 10 years went too far. And it's
only now that rating agencies and the bond markets are discriminating better,
more accurately, credit risks within the Euro zone starting at that sovereign
level. Irish spreads over bunds also widening following news Ireland has
received permission to recapitalize three of its banks. Some bank debt holders
have agreed to a haircut. Spain's last scheduled bond auction of the year sees
reasonable demand too; yields rising though compared with last month's sale.
Snow and freezing temperatures meanwhile in Europe continues to cost travel
carriers around the world thousands of passengers who've been forced to camp out
in airport terminals like British Airways terminal at New York's Kennedy
Airport. The arctic conditions are expected to continue for much of this week.
British public borrowing surged to a record high in November. That was driven by
a higher health defense and EU spending
compounded by the weakest tax revenues in almost a year. The Treasury though
says it remains on track to eliminate the budget deficit over the course of the
next four years. Tensions on the Korean Peninsula eased further today. China
welcomed North Korea's offers to accept the visits by international nuclear
inspectors in response to Monday's live firing drills by South Korea. Beijing
says Pyongyang should now make good on its word. North Korea has the right to
use nuclear power for peaceful purposes. But, at the same time, it must accept
the IAEA inspections. And we hope that related issues will be handled in a
framework of the six-party talks. Well, that's all from us for now. But do stay
with us for news updates on the hour. I'm Nick Edwards, and this is Reuters