Oil ends lower, hit by Spain's debt downgrade
SAN FRANCISCO (MarketWatch) -- Oil settled lower on Friday
after fluctuating earlier, as a downgrade for Spain's debt brought
back concerns about a potential European debt crisis weighing on
oil demand. Oil for July delivery declined 58 cents, or 0.8%, to
$73.97 a barrel. Oil for August delivery retreated 46 cents, or
0.6%, to $75.16 a barrel. Gasoline for July delivery lost a penny,
or 0.4%, $2.03 a gallon. Fitch Ratings on Friday downgraded
Spain's debt to AA+ from AAA, citing concerns about the country's
level of debt relative to its gross domestic product
By William L. Watts, MarketWatch
LONDON (MarketWatch) -- Fitch Ratings on Friday cut Spain's credit
rating from AAA to AA+, citing expectations that efforts to reduce
public- and private-sector debt levels would significantly slow
economic growth over the medium term.
Fitch said Spain's ratings outlook was stable.
"Despite government debt and associated interest costs remaining
within the AAA range, Fitch anticipates that the economic adjustment
process will be more difficult and prolonged than for other economies
with AAA-rated sovereign governments, which is why the agency has
downgraded Spain's rating to AA+," said Brian Coulton, head of
EMEA sovereign ratings at the agency.
The move, announced after the close of European markets, put added
pressure on U.S. stocks. The euro
-0.5905%) remained lower versus the U.S. dollar at
$1.2302, down around 0.3% on the day.
But economists said the downgrade wasn't a surprise.
Spain moved into the spotlight in the long-running euro-zone
sovereign debt crisis this week as worries mounted about the country's
banking sector after the Bank of Spain stepped in to rescue CajaSur, a
failed regional lender.
The Spanish parliament earlier this week approved a controversial 15
billion euro ($18 billion) package of austerity measures by a single
vote. The measures include cuts to pay for civil servants and a
pension freeze. Read
about Spain's austerity plan.
"All in all, no big news, and Spain losing AAA status is
therefore not overly surprising," said Tullia Bucco, economist at
UniCredit Bank in Milan. "While recent austerity measures are
credible and go in the right direction, growth prospects remain
investors' main concern."
Standard & Poor's last month downgraded Spain to AA from AA+. Read
about S&P's downgrade.
Fitch said Spain's rigid labor market and the restructuring of
regional and local savings banks, or cajas, will hinder the pace of
adjustment, particularly in the aftermath of the nation's collapsed
The agency said the government's fiscal consolidation plan is
"ambitious and supported by specific and detailed measures, some
of which have already been implemented." It also noted what it
called Spain's track record of responsible public finances and an
"unblemished" debt-servicing record.
But the recovery is likely to underperform the government's expectations.
Servicing Spain's foreign debt will be a source of strain, while the
costs of restructuring the caja sector could be
"substantial," although likely to remain significantly less
than the €9 billion set aside under the governments Fund for
Restructuring of Banks, Fitch said.
The stable outlook for Spain's sovereign rating reflects expectations
the country's credit profile "will remain very strong and
consistent with its AA+ rating, even in the event of some slippage
relative to official fiscal targets," the agency said.
William L. Watts is a reporter for MarketWatch in London.