Bloomberg News

S&P Roils Global Markets With Erroneous French Rating Downgrade

November 16, 2011

Nov. 10 (Bloomberg) -- Standard & Poor’s roiled global equity, bond, currency and commodity markets when it sent and then corrected an erroneous message to subscribers suggesting France’s top credit rating had been downgraded.

The benchmark Stoxx Europe 600 Index extended its decline to 1.5 percent to 234.11 and French 10-year bond yields surged as much as 28 basis points to 3.48 percent, the highest level since July. The euro pared gains and U.S. equities briefly dropped after the mistaken announcement. Commodities erased gains before resuming increases after S&P affirmed France’s AAA rating in a later statement.

“It clearly raises issues about internal systems and controls,” said Christopher Whalen, managing director of Institutional Risk Analytics, a Torrance, California-based bank- rating firm. “The onus is on them to be careful and it’s troubling. Whether you’re a broker dealer or a rating agency, everything you say has to be very carefully considered because of the weight that they carry.”

A downgrade of France’s credit rating would affect the rating of the European Financial Stability Facility, the bailout fund for struggling euro member countries that has funded rescue packages for Greece, Ireland and Portugal partially through bond sales. If the EFSF has to pay higher interest on its bonds, it may not be able to provide as much funding for indebted nations.

S&P’s erroneous message was put out at 3:57 p.m. Paris time. The company sent a release at 5:40 p.m. Paris time saying the message was incorrect and affirming France’s rating.

Martin Winn, a S&P spokesman in London, didn’t immediately reply to a request for additional comment after forwarding the rating notes.

The euro rose 0.6 percent to $1.3620 at 1:28 p.m. in New York after paring its gain to $1.355. The S&P 500 Index dropped as much as 0.1 percent to 1,227.7 after the erroneous announcement and the S&P GSCI Total Return Index of 24 commodities weakened 0.4 percent before gaining 0.9 percent.

--Editors: Dave Liedtka, Paul Cox

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus