Spain's future is looking a little brighter than it has in recent weeks, after Moody's left the troubled country's credit rating in investment-grade territory.
The decision to refrain from slapping Spain with a junk rating was based on an assumption that Madrid will tap Europe's bailout fund, the European Stability Mechanism, and reflects progress the country has made on fiscal and banking reforms, said Moody's late Tuesday.
It was also a pleasant surprise for investors.
"By passing on the opportunity to downgrade Spain's rating to junk, Moody's removed one major uncertainty from the financial markets, and investors around the world have responded positively," said Kathy Lien, managing director of foreign exchange strategy for BK Asset Management.
The euro broke through the $1.30 level Wednesday and is trading at a one-month high versus the dollar, while the yield on Spain's 10-year bond fell as low as 5.462%, the lowest since early April. Spain's benchmark IBEX 35 index jumped more than 2% Wednesday.
Meanwhile, the cost of insuring Spanish government debt against default dropped to a 15-month low, according to data from Markit. The spread on five-year Spanish credit default swaps, narrowed to 277 basis points from 347 basis points.
While Spain avoided a downgrade by Moody's, the rating agency still maintains a negative outlook on the country given the challenges that lie ahead.
Spain has yet to formally ask for a bailout, but expectations are that it will soon seek a line of credit from the ESM, which would allow the European Central Bank to start buying its bonds.
Goldman Sachs (GS) told investors early Tuesday to buy JPMorgan Chase (JPM), and stop buying Morgan Stanley (MS).
JPMorgan Chase was upgraded to a so-called "conviction list buy," which, in Goldman Sachs' parlance, means run out and buy it. Conversely, Morgan Stanley was downgraded to a "hold" from a "buy."
Both banks have seen share prices fall precipitously this year, because of what Goldman's analysts say are "idiosyncratic events," including potential repercussions MOREMaureen Farrell - Jun 26, 2012 12:26 PM ET
Another day, another downgrade in Euroland.
Egan-Jones lowered France's credit rating one notch to "BBB" from "A" on Thursday.
The ratings agency pointed to France's rising debt and slowing economic growth. It also warned that France is fond of subsidizing its banks, which could prove costly for the government.
In a subtle turn of phrase, Egan-Jones summed up the situation in France thusly: "Disastrous trend and the worst has yet to come."
While France MOREBen Rooney - Jun 14, 2012 3:39 PM ET
|The men America has left behind|
|Teen retailer Aeropostale has filed for bankruptcy|
|'Star Wars' May the 4th a marketing opportunity for the Disney empire|
|Should investors fear President Trump or Clinton?|
|What's wrong with Apple?|