UK stocks are expected to open lower after Standard & Poor’s slashed Spain’s rating, putting the euro zone debt crisis back in the spotlight. The FTSE 100 is set to open at 5,735, down 13 points (0.2 percent) from Thursday’s close.
The agency downgraded the euro zone’s fourth largest economy, which has recently seen yields on its ten year bonds top six percent, to BBB-plus from A with a negative outlook. S&P said it expected the Spanish economy to shrink, adding that the government needed to provide more fiscal support to the banking sector.
“The downgrade should not have come as any real surprise, given Spain was put on outlook negative on January 13,” said chief market strategist at IG Group Chris Weston.
S&P has also decided to leave Ireland’s rating unchanged at BBB-plus.
In Asia, the Bank of Japan has expanded its asset purchase programme by ¥10 trillion, which was double the expected amount.
This afternoon, traders will turn attention to the US, where the Commerce Department will release its first quarter GDP estimate. The report is expected to show that the US economy expanded at an annualised rate of 2.5 percent in the first quarter, down from three percent in the final three months of 2011.
Today’s US data will also include the final reading of the University of Michigan consumer confidence index for April.
Across the Atlantic, the Dow Jones Industrial Average (DJIA) surged 114 points (0.85 percent) to end the session at 13,024 and the broader S&P 500 index added nine points (0.65 percent) to close at 1,400.
Asian markets were in selling mode today. Japan’s Nikkei 225 was down 73 points (0.75 percent) at 9,488 and China’s Shanghai Composite Index declined three points (0.15 percent) to 2,401.