(Bloomberg) — Greece’s investment-grade status was restored by Scope Ratings, evidence of its progress in repairing public finances 13 years after it became the first euro-zone member to be cut to junk.
Friday’s decision helps draw a line under the debt crisis that erupted in 2010 and required three international bailout programs as Greece’s membership of the now 20-member euro zone was thrown into question.
It also follows the resounding re-election of Prime Minister Kyriakos Mitsotakis, who’s pledged sound state finances and a continuation of the economic reforms he embarked on four years ago.
“A steady trajectory of decline in public debt, on the back of high inflation, above-potential real economic growth, low average interest costs of the prevailing debt portfolio and achievement of primary fiscal surpluses” is among drivers for the upgrade, Scope said in a statement lifting Greek sovereign rating to BBB- from BB+.
It also cited “sustained European institutional support for Greece,” while added that “credit ratings remain challenged,” mainly due to high government debt.
The upgrade was widely expected by investors, who have been buying the nation’s bonds at lower yields than those of investment-grade peers like Italy, making them the euro area’s best performers this year. That’s a turnaround after many were burnt in the largest sovereign restructuring in history.
Read more: Hot New Play in Stock and Bond Markets, Greece Is Suddenly Booming
Scope’s assessments aren’t currently recognized by the European Central Bank — meaning it won’t accept Greek bonds as collateral. But that situation may change soon as the Frankfurt-based institution reviews Scope’s eligibility.
Analysts expect other ratings firms to follow Scope’s example over the coming months, with Mitsotakis targeting upgrades by year-end. Before Friday’s announcement, Japan’s Rating and Investment Information Inc. was the first credit assessor to lift Greece to investment.
DBRS Morningstar earlier on Friday highlighted that Greece is on the threshold of an investment grade rating, saying it was focused on the implementation of structural reforms, improvements in economic prospects and the country’s commitment to fiscal consolidation.
With Mitsotakis planning to repay rescue loans early and trim the ratio of debt to economic output below 140% by 2027 from a high of 206% in 2020, investors had already been piling into Greek bonds.
The benefits of attaining investment status will be huge and haven’t been fully priced in yet, according to Bank of Greece Governor Yannis Stournaras. Only one in 10 funds can invest in a jurisdiction rated below that, he said last month.
Other Mitsotakis promises for his second term include cutting unemployment to 8%, boosting exports to 60% of gross domestic product and returning to primary budget surpluses of 2%-2.5% of GDP a year.
“Structural reforms that have meaningfully curtailed high non-performing loan ratios and substantively enhanced banking-system stability alongside policies aligned with Recovery and Resilience Facility funding and the European Semester mobilizing investment and boosting recovery” also supported Friday’s action, Scope said.
–With assistance from Sonja Wind, Aline Oyamada and Hari Govind.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
