The erroneous message sent by S&P on Thursday, frightened the French investors who were already worried over worsening debt crisis of eurozone countries. The Standard & Poor erroneously proclaimed the downgrade of credit rating of France which resulted in worst day in the history of French government bonds.
The news roiled the equity, bond and commodity markets with the Stoxx 600 benchmark Index extended its decline by 1.5%. Commodity gains vanished, while the euro pared gains and US equities suffered losses significantly. The bonds got hammered, as 10-year yields were already at the peak before the news flashed and they jumped by significant points to create record hike. The regulators and policy makers reacted immediately, while there was a fear that their actions and efforts to regulate the French economy would be at stake. However, after lethal two hours of market havoc, S&P declared that the announcement was resulted from technical error and the action was not intended to spread any negative news about France.
Finance minister Francois Baroin declared that, they will impede to spread any pessimistic messages and the country has enough plans, strategies as well as commitments to curb the financial deficit. He said the S&P's mistake was quite shocking and regulators will investigate the matter to the root. The analysts and regulators of financial markets have released a probe into the matter immediately after that.
Standard & Poor was already under pressure from regulators of Europe over the latest government debt downgrade and so far it has a small justification on the reason of error. The rating agency explained that it is scrutinizing the matter of incorrect message, which was unknowingly distributed to few website subscribers of the credit rating agency. President Nicolas Sarkozy is sure about the finances of France and allotted 18 billion Euros saving which will be utilized in order to stabilize the economic growth as well tax revenues. The fiscal austerity has been structured in order to keep France secured from an economical slowdown and financial downgrade.
The recent mistake of Standard and Poor’s will further shore up European regulators who monitor the actions of rating agencies in scrupulous manner. The rules pertain to rating agencies will toughen and regulators will ensure that the framework will be followed in more responsible and transparent way.
