The three major rating agencies affirmed Germany’s triple-A sovereign debt rating today, although rumors of a pending cut pushed down stocks in Frankfurt by as much as 4% earlier in the day.
Standard & Poor’s, Moody’s and Fitch affirmed Germany’s credit rating at AAA with a “stable” outlook.
Germany’s DAX Index fell to as low as 5475.65 before recovering somewhat to close down just under 97 points, or 1.71%. France’s CAC 40 index fell 0.7% to 3,119, dragged lower by media conglomerate Vivendi, and London’s FTSE 100 benchmark fell 1.4% to 5,131.10.
There was also another rumor that, like several of its neighbors, Germany would impose a short-selling ban on financial stocks, while rising short-term interest rates in Greece led to a resumption of fears the country will default on its debts.
The iShares MSCI Germany Index ETF (EWG) is down 2.9% at $20.11
The German downgrade rumor may have started in Asia. Singapore-based Anthony Michael of Aberdeen Asset Management said in a recent note to clients that “the writing is on the wall” for a downgrade of Germany in the near future. He cited “weak fiscal fundamentals” because of risks from the eurozone structure.
The reaction to the downgrade forecast is “more of an example of just how high tensions remain in the markets,” said Joshua Raymond, chief market strategist at City Index in London.