Reduced Outlook for Credit Rating Diminishes Optimism from Global Markets

On the Zagreb Stock Exchange today, investor sentiment could be influenced by the news of the downgrade of Croatia’s credit rating outlook, meaning that the positive mood from foreign exchanges may not be reflected on the Crobex.

All 6 analysts from brokerage firms who participated in the Hina survey expect stagnation of the Crobex today.

The Crobex index strengthened by 0.59 percent yesterday, to 1,859 points, while Crobex10 increased by 0.62 percent, to 1,046 points.

The regular turnover in shares amounted to 4.6 million kuna, which is approximately 4 times less than the day before.

The only stock with a million kuna turnover was HT’s share, which had a slight increase of 0.09 percent, to 174.89 kuna.

Separately, a block transaction with Zvijezda’s shares achieved a turnover of 3.58 million kuna, at a price of 3,580 kuna per share.

“The positive sentiment from foreign exchanges, driven by an increase in industrial activity in the U.S. and solid business results from companies, may not be reflected on the Crobex today, as the news of the downgrade of Croatia’s credit rating outlook could influence the mood of domestic investors,” says Nada Harambašić Nereau, a financial analyst at Raiffeisenbank Austria.

This morning, Standard & Poor’s downgraded Croatia’s credit rating outlook from stable to negative, while maintaining the current credit rating for borrowing in foreign and domestic currency at BB+.

On Wall Street, the Dow Jones and S&P 500 indices reached new all-time highs on Thursday, thanks to better-than-expected data from the U.S. economy.

The Dow Jones strengthened by 0.83 percent, to 15,628 points, while the S&P 500 rose by 1.25 percent, to 1,706 points, and the Nasdaq index increased by 1.36 percent, to 3,675 points, the highest level in 13 years.

The positive sentiment is primarily attributed to the Institute for Supply Management (ISM) data showing that its manufacturing activity index in the U.S. jumped from 50.9 to 55.4 points in July, the highest level in two years.

It was also reported that the number of initial claims for unemployment benefits fell by 19,000 last week, to 326,000, the lowest level since January 2008, indicating a recovery in the labor market.

As a result, stock prices rose this morning on both Asian and European exchanges.

“New guidelines will provide investors with the key employment report for the U.S. in July and the unemployment rate data today,” concludes Harambašić Nereau.