Fitch downgrades Italy to BBB-, stable outlook

Fitch Ratings agency says the downgrade reflects the significant impact of the COVID-19 pandemic on Italy’s economy and fiscal position

  • expects Italy’s govmt debt to GDP ratio to increase this year, by around 20%
  • Fitch forecasts an 8% GDP contraction in 2020
  • says Italy’s gross general government debt to GDP ratio will increase by around 20pp this year
  • stable outlook partly reflects view that ECB’s net asset purchases will facilitate Italy’s substantial fiscal response to covid-19 pandemic
  • downward pressure on Italy’s rating could resume if government does not implement credible economic growth & fiscal strategy
  •  says recession & economic policy response to covid-19 pandemic will result in sizeable deterioration of Italy’s budget balance this year
This is a negative input for euro
Link to Fitch for more … note this:
  • In accordance with Fitch’s policies, the issuer appealed and provided additional information to Fitch that resulted in a rating action that is different than the original rating committee outcome.
Huh … reading between the lines on this it could have been a worse outcome for Italy?
Note – S&P recently affirmed Italy at BBB/A-2 with an outlook negative.
And – the ECB will still accept Italy debt as collateral given their recent changes to accept debt which was eligible on April 7th.

Moody’s on the phase 1 US-China deal – will not resolve core differences

Moody’s downbeat not only on the trade deal …

  • says outlook for APAC corporates remains negative in 2020 amid slowing global growth and trade policy uncertainty
  • “while positive, the US-China trade agreement will not resolve core differences, dampening business sentiment globally”
  • global economic growth will remain lacklustre, with growth in the US and China decelerating to 1.7% and 5.8% respectively in 2020
  • expects major central banks, including US Fed ECB, & BOJ will maintain accommodative monetary policies

Dunno, at least until the November US election we can expect US-China differences to be swept under the carpet? Or, maybe not?

APAC is Asia-Pacific in case you are wondering.

Moody’s says global manufacturing outlook for 2020 is negative

Moody’s on the manufacturing outlook

  • Most manufacturign sectors will likely experience only modest profit growth or even slight declines in 2020
  • Agricultural, transportation and utilities end markets exhibit weak growth prospects
  • Aerospace and defense segment has strong growth prospects
  • Key drivers for global manufacturing include weak earnings growth expectations and deteriorating sentiment

If Moody’s track record is any indication, then now is the time to buy the stocks of manufacturers relating to agricultural, transportation and utilities industries.

Moody’s: Global economy will remain fragile in 2020

Moody’s weighs in with some commentary about the world economy

  • Global economy will remain fragile next year as risks to credit conditions rise
  • Rising political and geopolitical risks are exacerbating slow growth
  • That reduces economies’ abilities to respond to shocks
  • Trade uncertainty will continue to disrupt supply chains and weigh on investment
  • Overall global growth will remain lackluster amid deceleration in US and China
  • Recession risks will remain elevated in Europe and in the US
Adding that they do not expect a recession next year but recession risks are building amid a backdrop of trade policy uncertainty in the global economy.
They also mention that global interest rates will remain low and that yield curves are to remain flat for several years going forward.
I think this is pretty much the base-case scenario for the global economy at this point i.e. slow and sluggish growth with rising risks of things turning into something worse.
Any potential rebound in global trade and manufacturing conditions will likely take a few years to come about so if we can weather that storm, then perhaps the recession can will be kicked down the road again for a few more years.

Moodys Downgrades UK Outlook To Negative On “Brexit Paralysis”

Moody’s downgraded its outlook on Britain’s debt (currently rated Aa2) to negative from stable after the market close on Friday, saying Brexit had been a catalyst for an erosion in the country’s institutional strength, perceived “material deterioration” in UK governance, and that the country’s ability to set policy has weakened in the Brexit era along with its commitment to fiscal discipline.

The outlook cut represents a catch down to its competitors: the UK is currently rated AA by S&P and AA- at Fitch Ratings, with both companies having the UK on negative watch.

“It would be optimistic to assume that the previously cohesive, predictable approach to legislation and policymaking in the UK will return once Brexit is no longer a contentious issue, however that is achieved,” the ratings agency said adding that “the increasing inertia and, at times, paralysis that has characterized the Brexit-era policymaking process has illustrated how the capability and predictability that has traditionally distinguished the U.K.’s institutional framework has diminished.”

“The decline in institutional strength appears to Moody’s to be structural in nature and likely to survive Brexit given the deep divisions within society and the country’s political landscape,” Moody’s added.

The decision to put the UK on negative outlook even as Moody’s affirmed Britain’s Aa2 long-term issuer and senior unsecured ratings comes one month before an election that is likely to determine the future of Brexit. While the election will have a big impact on Brexit, this week has seen both sides escalate their spending pledges, drawing election battle lines with plans to end a decade of U.K. austerity. Continue reading »

Moody’s changes ratings outlook for eight Indian corporates to negative following sovereign outlook change -Full Text

Moody’s Investors Service (“Moody’s”) has taken a number of rating actions on Indian non-financial corporates, following its earlier announcement that it has changed the outlook on India’s Baa2 sovereign rating to negative from stable.

As a result of the sovereign rating action, Moody’s has changed the outlook on the ratings of the following companies:

Bharat Petroleum Corporation Limited (BPCL): Affirmed Baa2 foreign currency issuer and senior unsecured debt ratings and revised outlook to negative from stable. Also affirmed the (P)Baa2 foreign currency senior unsecured rating on the MTN program. The ba1 baseline credit assessment (BCA) is affirmed.

Hindustan Petroleum Corporation Ltd. (HPCL): Affirmed Baa2 foreign currency issuer and senior unsecured debt rating and revised outlook to negative from stable.

Indian Oil Corporation Ltd (IOCL): Affirmed Baa2 foreign currency issuer and senior unsecured debt ratings and revised outlook to negative from stable. The ba1 BCA is affirmed.

Oil and Natural Gas Corporation Ltd. (ONGC): Affirmed Baa1 local and foreign currency issuer rating; revised outlook to negative from stable. Also affirmed the (P)Baa1 foreign and local senior unsecured ratings on the MTN program. The baa1 BCA is affirmed.

Oil India Limited (OIL): Affirmed Baa2 local and foreign currency issuer and foreign currency senior unsecured debt ratings; revised outlook to negative from stable. The baa3 BCA is affirmed.

Petronet LNG Limited (PLL): Affirmed Baa2 foreign currency issuer rating; revised outlook to negative from stable.

Infosys Limited (Infosys): Affirmed A3 local currency issuer rating and revised outlook to negative from stable.

Tata Consultancy Services Limited (TCS): Affirmed A3 local currency issuer rating and revised outlook to negative from stable.

A full list of affected ratings is provided towards the end of this press release.

RATINGS RATIONALE Continue reading »

Moody’s lowers India’s outlook to ‘negative’ from ‘stable’

Moody’s Investors Service on Thursday changed its outlook on India’s ratings to “negative” from “stable”, citing increasing risks that the country’s economic growth will remain lower than in the past.

The outlook partly reflects government and policy ineffectiveness in addressing economic weakness, which led to an increase in debt burden from already high levels, the ratings agency said. (

India’s economy grew only 5.0% year-on-year between April and June, its weakest pace since 2013, as consumer demand and government spending slowed amid global trade frictions.

Moody’s on Japan – A1 rating affirmed, stable outlook maintained

Moody’s affirms Japan’s A1 ratings; maintains stable outlook

  •  says expects Japan’s fiscal and debt metrics to stabilize in the next few years
  •  says Japan’s sovereign rating and outlook continue to be driven over medium term by impact of social considerations on economy and public finances
  •  says traction on economic reform likely to partly offset pressure on potential growth from population decline

US-China trade war could become a currency war – Fitch

I reckon it already has…

Dollar yuan

According to Fitch Ratings’ global head of sovereigns, James McCormack, the trade war between US and China could possibly turn into a currency war moving forward:

“I do not want to suggest that the trade war is going to become a currency war – but it could. There’s an increased amount of discussion on how the US could influence the value of the dollar.”

On trade discussions itself, McCormack argues that China may slow down negotiations as they aren’t in a hurry whereas Trump wants to get things done before the election next year.
As for my own thoughts, we already have the makings of a currency war but it’s just that we’re not seeing an explicit or full-fledged one just yet.
The Fed may be the one implementing exchange rate policy in the US but ultimately, any decision stems from the Treasury and Mnuchin is the one dictating that side of things. Yesterday, he said that there isn’t any change to the dollar policy for now.
However, the fact that we’re seeing so much talk about from the Trump administration about wanting a weaker dollar is in itself a shift in stance in my books. That cannot be a clearer signal that the dispute goes beyond trade issues.