Surprise Moody's Downgrade Hits French Markets

French stocks declined after Moody's unexpectedly downgraded the nation's credit rating. This occurred as signs of easing strain on euro zone business activity failed to excite investors. The European Central Bank is focusing on economic growth with potential further interest rate cuts.

On Monday, French stocks led the decline in European markets following an unexpected downgrade of the country's credit rating by Moody's. The credit rating was lowered from 'Aa2' to 'Aa3' with a stable outlook, causing the blue-chip CAC 40 to drop 0.7%.

This move by Moody's came shortly after President Emmanuel Macron appointed Francois Bayrou as the fourth prime minister this year. Major French banks like Societe Generale, BNP Paribas, and Credit Agricole experienced losses amid the news.

Across the euro zone, the decline in business activity seemed to ease during December. However, the HCOB's preliminary composite euro zone Purchasing Managers' Index indicated the persistent contraction in core sectors. Meanwhile, the ECB is eyeing further interest rate cuts to boost growth in a low-inflation environment.

(With inputs from agencies.)