While the media has focused the world’s attention on the economic collapse of Greece, Standard & Poor’s has downgraded Italy’s credit rating. If Italy falls, the exposure to France’s banking institutions will affect the entire European Union.
A surprise downgrade of Italy by Standard and Poor’s early today (local time) has added to concerns of contagion in the debt-stressed euro zone, with local shares likely to react negatively to the news.
Although the the SPI futures index was 4 points higher to 4100, the downgrade could tip stocks into the red after Standard and Poor’s said the cut reflected its view of Italy’s weakening economic growth prospects. Standard and Poor’s downgraded its unsolicited ratings on Italy by one notch to A/A-1 and kept its outlook on negative.
The Aussie dollar has dropped sharply against the greenback today, dipping from $US1.022 to $US1.018 about 8.30am.