LONDON — Major stock indexes across the European continent are dragging on Wednesday morning, pulled lower by news overnight that China’s credit rating has been cut by ratings agency Moody’s.
Moody’s Investors Services cut China’s long-term local and foreign currency issuer ratings on concerns the country’s financial strength would erode in the coming years, while debt rises.
The outlook for China was changed from stable to negative. The rating was dropped by a notch from Aa3 to A1, which is still comfortably in the investment grade, Moody’s said.
“Moody’s expects that economy-wide leverage will increase further over the coming years,” the ratings agency said.
“The planned reform program is likely to slow, but not prevent, the rise in leverage. The importance the authorities attach to maintaining robust growth will result in sustained policy stimulus. Such stimulus will contribute to rising debt across the economy as a whole.”
That news, while not disastrous, is worrying for investors given China’s importance to the macroeconomic picture globally, and as a result, sentiment has taken a hit. By 8.15 a.m. BST (3.15 a.m. ET) all of Europe’s major bourses are lower, although losses are broadly limited.
Here is the scoreboard:
In Britain, the FTSE 100 is just marginally lower, with the country’s investors looking beyond the initial shock of the terror attack that killed 22 people in Manchester on Monday night, and the subsequent increase of the UK’s terror threat level to critical, meaning that a further attack could be imminent.
The FTSE’s biggest mover so far is DIY shop operator Kingfisher, the owner of B&Q, which has seen shares drop close to 5.5% after results out on Wednesday morning showed like-for-like sales in the three months to March fell 0.6%.