Stockmarkets rally after nosedive over Greek junk rating

Greek woes look set to continue as rating’s agency Moody's downgrades its status by four notches to "junk". It follows EU and IMF scrutiny of its accounts and the country’s inability to cut its spiralling debt.  

Reuters

The announcement caused European stock markets to nosedive despite a rally in early morning trading on Tuesday .

At about 1500 GMT on Tuesday, London's benchmark FTSE 100 index of top shares was up 50 points to 5219.32. Trading in Paris’ CAC 40 also rallied in morning trading.

Shockwaves were also felt by the euro which fell to 1.2190 dollars from 1.2223 dollars in New York late on Monday.

Moody's said that considerable uncertainty about Greek plans, even with the help of an EU-IMF bailout package, to reduce its huge debt and balance its finances justified the ratings cut by four notches from A3 to Ba1.

"There has been so much negative comment about the fiscal position of Greece in the past few months that it would be an exaggeration to say that last night's downgrade of Greek debt to junk status by Moody's was a complete surprise," analyst Jane Foley at online trading site Forex.com told the AFP news agency.

She explained that the downgrade showed that Greece was still at risk of defaulting on its payments and underlined the difficulties facing the eurozone.

But there was some good news for the Greeks in the form of a potentially lucrative deal with the Chinese.

Business leaders from top Chinese and Greek companies signed a series of deals on Tuesday in shipping, logistics and airport projects in the Mediterranean country which could be worth several billion euros.