The agency cited the risk of further capital flight due to the Ukraine crisis. In Q1, outflows doubled on year to $50.6B and the government has forecast that the full-year figure could hit $70-100B. An increase in sanctions on Russia could also prompt S&P to further reduce the country's rating.
S&P's action comes a day after Russia began military exercises on its border with Ukraine in response to the latter's security forces killing five pro-Moscow rebels during its attempts to reassert control over the eastern part of the country. The developments have increased fears that Russia may invade eastern Ukraine, the nation's industrial heartland.
Russia's Micex index is -1.6% and the USD-RUB is +0.4% at 35.925 rubles.
Japanese core inflation, which excludes fresh food prices, held steady at 1.3% on year in March but came in below consensus of 1.4%.
Core core CPI, which excludes fresh food and energy, slipped to +0.7% from +0.8% in February.
Overall inflation increased to 1.6% from 1.5%.
Tokyo CPI surged to +2.9% in April from +1.3% in March and core inflation to 2.7% from 1% for the biggest rise since 1992, boosted by the hike in sales tax at the start of the month. Excluding that increase, prices rose just 1%, as in March.
The question is whether the Bank of Japan's attempt to push inflation to 2% by 2015 has stalled despite the BOJ's massive bond-buying. If so, the bank might feel the need to increase its asset purchases. (PR)
BOJ officials are increasingly concerned that the domestic bond market isn't reflecting how inflation has risen over the past year or so, Bloomberg reports. That raises the risk that yields could suddenly surge. The problem for the BOJ is that yields have stayed low because of its QE program.
Meanwhile, President Barack Obama has ended a three-day trip to Japan without sealing a trade deal that's seen as key to the wider 12-nation Trans-Pacific Partnership. While the U.S. and Japan have made a breakthrough on market access, gaps remain.
The Nikkei is +0.2% and the USD-JPY is flat at ¥102.33.
The real rises to its strongest level vs. the dollar since October amid a published report that Brazilian President Dilma Rousseff may replace finance minister Guido Mantega with central bank chief Alexandre Tombini.
First up for Rousseff though, will be winning reelection in October.
Tombini has led a series of rate hikes over the past year, but recently signaled a pause could soon be coming. Looking ahead to easier monetary policy, Brazil's previously beaten down stock market has been one of the globe's strongest performers over the past couple of months.
President Barack Obama has warned Russia of further sanctions if it doesn't act to ease tensions in eastern Ukraine, as agreed upon in a peace deal signed last week in Geneva.
Obama's comments come after Russian Foreign Minister Sergei Lavrov yesterday declared that an attack on his country's citizens in Ukraine "is an attack against the Russian Federation." He added that "if we are attacked, we would certainly respond."
In what may or may not end up being a bell-ringer of a deal, French cable company Numericable finalizes its record €7.9B junk bond offering, reportedly pricing the yield even lower than the initial whisper numbers. The size blows past the previous record - Sprint's $6.5B issuance last year.
This deal is spread over €2.25B of euro-denominated paper, $7.75B of dollar-denominated, and across three tranches of varying maturities.
RBS's Albert Gallo: “The new deal highlights strong growth in the European high-yield bond market, which has grown fivefold over the past five years to nearly €300B . . . Despite the strong supply, we expect European high-yield spreads to continue to tighten over the year, on recovering growth, easy ECB policy, stable fundamentals and low default rates.”
The proceeds are to be used to fund Altice's (Numericable's parent) purchase of Vivendi's telecoms business.
Asian stocks trade mixed and European shares are mainly lower, with a strong showing on Wall Street yesterday helping to boost sentiment, but with disappointing PMI data out of China and France dampening the mood.
Japan +1.1%, Hong Kong -1%, China -0.3%, India +0.5%.
Euro Stoxx 50 -0.3%, London flat, Paris -0.4%, Frankfurt -0.3%, Milan -0.2%, Madrid +0.2%.
The Bank of England's Monetary Policy Committee voted unanimously, as expected, to keep interest rates at 0.5% and against more quantitative easing at a meeting earlier this month, the minutes of the meeting show.
Meanwhile, the U.K.'s Public Sector Net Borrowing dropped to £4.86B in March from £7B in February and was well below consensus of £9.1B. (PR)