Friday’s downgrade of European credit ratings had no negative impact on stocks on Monday morning, with European and Canadian indexes showing modest gains on Monday.
The S&P/TSX composite index closed at 12,258.60, up 27.54 points or 0.2 per cent. In Europe, Germany’s DAX index rose 1.3 per cent and France’s CAC 400 rose 0.4 per cent. The U.S. stock market was closed for Martin Luther King day.
The moves follow a well-telegraphed decision by Standard & Poor’s on Friday evening, after markets closed, to cut the credit ratings on various European countries – most notably, taking France’s triple-A credit rating down one notch. On Monday, European Financial Stability Facility also lost its top-notch credit rating, which fell to AA+ from AAA.
The downgrades also had little impact on most bonds on Monday. Yields on French, Italian and Austrian 10-year government bonds actually fell (yields decline as bond prices rise). German bond yields held steady, after falling sharply on Friday when news of the downgrades circulated widely. Still, there are concerns here – in particular, that the EFSF’s lower credit rating will complicate efforts to increase the leverage on the EFSF’s bailout fund.
Among Canadian stocks, banks were relatively flat, with Royal Bank of Canada unchanged on a percentage basis and Toronto-Dominion Bank down less than 0.1 per cent.
Uranium One Inc. surged 15.2 per cent after it reported that its quarterly production rose 62 per cent. Other uranium producers were also strong, with Cameco Corp. up 5.1 per cent.
Pembina Resources Ltd. fell 4.3 per cent after it struck a $3.2-billion deal for Provident Energy Ltd. Provident shares rose 17.8 per cent.
Meanwhile, railway stocks were down: Canadian Pacific Railway Ltd. fell 1.1 per cent and Canadian National Railway Co. fell 2.5 per cent.