The Guardian says an S&P downgrade of France could come within days and that there is the potential for catastrophic fallout.
Market reactions to ratings downgrades are kinda strange. They don’t come out of the blue; we’re warned by the agencies weeks in advance. In the case of S&P, they’ve narrowed that window to a “matter of days” over a week ago…
Yet markets still get squirrelly at the idea.
Case in point: The market got walloped after S&P downgraded the US back in August. The move was widely expected and had been leaked hours before the fact. Still, the market got creamed when they reopened the following Monday morning and set off a very rough month or so for the markets.
So we await what will likely be a downgrade of France by S&P. My guess is the market reaction will be more muted than the last summer. If the AAA rating is affirmed, a short-covering rally should unfold for few days before the intractable nature of the euro zone crisis reasserts itself.
