More losses for the FTSE after Ratings Cuts

European equities suffered more losses in early trading on Friday after Moody’s cut their ratings on 16 Spanish banks and Fitch downgraded Greece, highlighting increased potential that the country could leave the euro. Heavy losses in Asia early this morning where the Nikkei lost 3% and the Hang Seng closed lower by 1.3% also locked in a weaker start for European stock markets today.

Investors continue to avert risky asset classes such as mining and financial stocks in an effort to protect the value of their portfolios as stocks continue to head south. The moves we have seen lately in the Volatility Index – a key gauge of market fear – is equally concerning and echoes the key risk aversion theme taking place. The S&P VIX rose to levels not seen since December last year, whilst the FTSE VIX also saw similar spikes.

Having said that, we had expected European markets to open much worse than they actually did, with the FTSE 100 down by just 34 points or 0.65% within the first hour of trading, compared to earlier market calls of losses of 1.6%. We will need to see some bargain hunting if we are to see a bounce from the most recent lows but right now, it’s difficult to imagine investors confident enough to buy into a market that is being weighed down by uncertainty, unless we see some affirmative rhetoric or action from Central banks. Most trading we are seeing now is based on short term contracts which are keeping volatility high and price swings wide.

BT Group was the top performing UK heavyweight stock on the FTSE 100, gaining 1.28%, closely followed by Antofagasta and National Grid shares.

Amongst the biggest fallers are Wolseley, Vedanta Resources and Rolls Royce Group, with shares falling around 2% on the day.

Eyes are turning towards the most hotly anticipated IPO since Google, when Facebook launches itself into public life later today. For my blog entry on how you could look to trade Facebook shares, please click here.