On 30th April 2012, in Europe Widespread credit-rating downgrades for the banking sector in the Spain and a contraction of the Spanish economy in the first quarter provoked a muted reaction, with government of Spain bond yields holding their ground while equity markets fell only a tad and the euro traded in a tight range against the dollar.
Economy in Spain
The Spanish economy contracted 0.3% in the first quarter from the fourth, and on annual basis 0.4%, although the numbers were slightly above the Bank of Spain give estimates last week. The expectation of Bank ofSpain in the first-quarter GDP contracted 0.4% from the fourth quarter and 0.5% on an annual basis.
As per the analysts still have deep concerns about the financial future of the country, despite the rather quiet reaction from several asset classes. According to Martin van Vliet, an economist at ING Bank, We fear that things are likely to get worse before they get better. The ongoing drag from real estate and the sheer scale of Spain’s planned fiscal adjustment mean that the recession will almost certainly deepen in the coming quarters, pushing unemployment to even more dramatic highs.
S&P and Spain
Standard & Poor’s announced 30th April 2012, adding to the malaise, it has downgraded 11 banks of Spain meaning that some are now sub-investment grade, while five other banks have had their outlook shifted down. This announcement follows the two-notch downgrade of Spain’s sovereign rating on Friday from A to BBB+ by S&P. In addition, nervousness ahead of Spain and France’s bond auctions on Thursday will likely intensify. All this while Spain is bracing for a week of rallies and demonstrations against draconian cuts in public services. Japanese and Chinese markets were shut for holidays. Australia’s S&P/ASX 200 gained 0.8%, South Korea’s Kospi Composite added 0.3% while Hong Kong’s Hang Seng Index advanced 1.6%.