Markets brush off UK downgrade
Despite a drop in the pound after downgrade news on Friday, markets appear not to care that much about the UK losing its AAA rating. ESCP Europe Business School's Anthony Evans had this after the news on Friday:
the Moody's downgrade is political news masquerading as economic news.
— Anthony J. Evans (@anthonyjevans) February 23, 2013
Ratings agencies tend to play catch up to markets, not vice-versa. They don't have any special information that other actors in the markets do not, and most were aware that a downgrade was coming. All the bad news about the UK economy was well known and priced in to decisions.
As such, we've seen sterling creep back up and other indicators are looking good with the FTSE 100 up 1.33%, FTSE 250 up 0.44% and gilts have had little reaction, currently 2.12% after a high of 2.173%. But that doesn't mean that we're out the woods yet.
The real problem post our loss of AAA: neither the coalition, nor Labour, nor Bank of England has a workable plan to rescue UK economy
— Allister Heath (@AllisterHeath) February 23, 2013