Stock Market News for January 17, 2012 – Market News

The New Year had begun on a bright note for investors with the markets witnessing positive momentum on its first trading day of the year. However, the markets have suffered from uncertainty in the weeks that followed after the lingering European debt crisis came back into focus.

With the American markets closed on Monday, in observance of Martin Luther King  Jr. Day, the focus was squarely on Europe and Asia in the light of Friday’s ratings downgrades by Standard & Poor. Though Germany’s Triple-A credit rating remained intact, nine European countries had their credit ratings downgraded on Friday. These include Italy, Spain, Portugal and Cyprus. These downgrade which severely dampened investor sentiments hurt France the most, which lost its triple-A credit rating.

However, Moody’s and Fitch are still maintaining their positive credit rating on France, while French President Sarkozy stated that he would implement even more reforms in order to get France back on track. President Sarkozy has already introduced two austerity packages with a view to defending France’s top rating but has made it clear that he won’t bring forth any more packages this year.

On Monday, European markets remained fairly stable in the light of the downgrades by Standard & Poor but the real impact of the downgrade on France will be determined only on Thursday, when it will issues bonds on a large scale with its newly S&P AA+  rating. Meanwhile talks seeking a negotiation of the restructuring of Greece’s debt came to a halt on Friday, reigniting fears of a Greek default. The talks failed amidst disagreements over how much capital investors would lose while swapping bonds.

On the other hand, Asian markets experienced a poor trading day on Monday, with major indexes registering a decline following news of the downgrade of credit ratings of nine European countries by Standard & Poor. Hong Kong’s Hang Sang Index declined 1% while Australia’s S&P/ASX200 and Japan’s Nikkei 225 Index fell 1.15% and 1.42% respectively. In India the Sensex closed 35 points higher after recovering from initial losses on news of easing inflation which helped to boost investor’s morale.

No major economic reports are scheduled for Tuesday, when the US markets will reopen after a one day federal holiday. Major upcoming economic reports scheduled for release this week includes Industrial Production, PPI, CPI and Housing Starts. Initial claims will be another major economic report this week. Also, most investors will focus on the fourth quarter earning seasons that will gain momentum this week.

Zacks Investment Research

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