Ratings Downgrades Hit Nokia and Generali
European stock markets are ending the week on a softer note today, although there is little in the way of fundamental news to push markets in either direction. High Spanish bond yields following the country's debt auction this week, where demand was lower than had been hoped, is casting a slight shadow on the markets, while the headway made over the past few sessions has brought about a spurt of consolidation and profit taking that has the benchmark indies in negative territory. With this, the IBEX (INDEX: ^IBEX) is underperforming, down around 3.2%.
As always, the following price moves are based on this morning's European trading.
The Spanish banking sector, prone to follow the country's economic outlook, has been pushing lower on the back of the concerns surrounding the country's sovereign debt Friday. Problems have been exacerbated after the Bank of Spain reported this week that "bad loans" in the sector climbed to an 18-year high in May, accounting for almost 9% of total lending.
In addition, the German government has said that the 100 billion pound bailout offered to Spanish banks must be restricted to "viable lenders" and emphasized that all care should be taken not to give funds to banks that are likely to fail anyway, highlighting the tenuous situation faced by the country's financial sector. BBVA (NYS: BBVA) is leading losses, down 4.6%.
In Finland meanwhile, phone maker Nokia (NYS: NOK) has plummeted 6% after rating agency Fitch downgraded the company's debt rating by two notches, from BB+ to BB-, citing the widening loss suffered in the second quarter. The struggling company's debt was already rated "junk" by the three major ratings agencies.
This drop follows a strong rally for Nokia yesterday after it reported better than expected sales of its Lumia 900 handset, a smartphone that the company hopes will rival the iPhone, but which has yet to make headway into this up-and-coming market.
Also hit by ratings downgrades today are Italian insurance firms, after Moody's reduced the ratings on three Italian majors noting the weakening creditworthiness of the country as a whole. Assicurazioni Generali (OTC: ARZGY.PK) has been the worst hit, falling almost 7% after Moody's downgraded their senior debt from A2 to Baa2, suggesting the company's ability to share asset losses with policyholders will be diminished because of losses on its investment portfolio.
On a more positive note, Swedish truck maker Scania (OTC: SVKBY.PK) has climbed almost 6% today after it reported second-quarter orders rising thanks to increasing demand in Russia, as well as predicting increasing demand from Europe going forward. At the same time, the company reported Q2 net income falling 40% year on year, while sales dropped 16% to 19.2 billion kronor.
As always, this morning's European news saw some winners and losers -- and perhaps some European buying opportunities. Indeed, legendary investor Warren Buffett has recently spent more than $1 billion buying the stock of a prominent European large-cap.
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Karl Loomes does not own any share mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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