Published by Uma Rajagopal
Posted on December 16, 2024
2 min readLast updated: January 28, 2026
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By Sruthi Shankar
(Reuters) -French stocks led losses across European markets on Monday after a surprise ratings downgrade by Moody’s, while signs of easing strain on euro zone business activity failed to enthuse investors.
France’s blue-chip CAC 40 dropped 0.7% after credit ratings agency Moody’s unexpectedly downgraded the country’s rating on Friday, bringing it to “Aa3” from “Aa2” with a stable outlook for future moves.
The news came hours after President Emmanuel Macron named veteran centrist politician Francois Bayrou as his fourth prime minister this year.
French banks including Societe Generale, BNP Paribas and Credit Agricole dipped.
Surveys showed Germany’s economic downturn eased slightly in December but business activity still contracted for a sixth month running, while France’s services sector shrank further in December.
Overall the decline in euro zone business activity eased this month as the bloc’s dominant services industry bounced back to growth, as per HCOB’s preliminary composite euro zone Purchasing Managers’ Index.
“That’s not much of a silver lining as it largely reflects the pessimism baked into economists’ forecasts,” noted Jack Allen-Reynolds, deputy chief euro-zone economist at Capital Economics. “The PMI is still lower than it was in October, and on past form remains consistent with the economy contracting.”
The pan-European STOXX 600 index fell 0.2%, trading near a two-week low. The German DAX and Britain’s FTSE 100 dropped about 0.3% each.
The European Central Bank has cut interest rates four times already this year and investors are betting on even more policy easing in 2025 as inflation worries have largely disappeared and anaemic economic growth is now a bigger concern.
The ECB will cut rates further if inflation continues to ease towards its 2% target as restricting economic growth is no longer necessary, ECB President Christine Lagarde said.
Focus will be on monetary policy decisions from the U.S. Federal Reserve, the Bank of England and the Bank of Japan later this week.
Porsche fell 2.4% after it warned it may write down the value of its stake in Volkswagen by up to 20 billion euros ($21 billion) and said it expects its group result after tax in 2024 to be “significantly negative”.
Volkswagen dropped about 2%.
Entain fell 6.7% after Australia’s financial crime watchdog launched legal action against the Ladbrokes owner’s local unit.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Mrigank Dhaniwala and Shounak Dasgupta)
A credit rating is an assessment of the creditworthiness of a borrower, indicating the likelihood of default on debt obligations.
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve economic goals.
The PMI is an economic indicator that measures the activity level of purchasing managers in the manufacturing and services sectors.
Economic growth is the increase in the production of goods and services in an economy over a period, typically measured by GDP.
The European Central Bank (ECB) manages the euro and formulates monetary policy for the Eurozone to maintain price stability.
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