Moody's cuts Portugal's bond ratings by two notches to A1

(MarketWatch) -- Moody's Investors Service on Tuesday downgraded Portugal's government bond ratings by two notches, citing the likelihood of further deterioration in the nation's finances and weak economic growth prospects.

The agency cut the ratings to A1 from Aa2 and said the outlook is now stable, with the upside and downside risks evenly balanced. Moody's had placed the ratings on review for possible downgrade on May 5.

In Lisbon, the PSI-20 stock index /quotes/comstock/30t!i:psi20 (XX:PSI20 7,313, +7.50, +0.10%) turned higher after falling initially in the wake of the downgrade. The index rose 21 points, or 0.3%, to 7,326 points in afternoon trading, underperforming other European stock markets. It earlier hit an intraday low of 7,264.34 points.

In the currency markets, the euro /quotes/comstock/21o!x:seurusd (CUR_EURUSD 1.2714, -0.0008, -0.0629%) also reversed earlier losses. It gained 0.4% to $1.2641.

In a statement, Moody's said it expected the Portuguese government's debt metrics to continue to deteriorate for at least another two to three years. (more)