Stock markets slide after US downgrade / Photo: © AFP
Stock markets slide after US downgrade
Asian and European stock markets slumped Wednesday after the United States had its top credit rating downgraded by Fitch.
Ratings agency Fitch downgraded the United States' top-notch credit rating by a step late Tuesday, citing a growing federal debt burden and an "erosion of governance" that has manifested in debt limit standoffs.
The decision to downgrade the US from AAA to AA+ sparked a fiery rebuttal from the White House.
"US markets are expected to follow their Asian and European counterparts lower in the wake of a surprise Fitch downgrade," noted Joshua Mahony, chief market analyst at Scope Markets.
"For markets, this will likely only represent a short-term dent in confidence."
The announcement meant it would be more expensive for the government to borrow. However, the risk-off sentiment sent traders rushing to safe assets, such as Treasuries, as well as the yen.
The downgrade follows a long, drawn-out row between Republicans and Democrats earlier this year over raising the US borrowing ceiling, which had fuelled fears of a devastating default by the world's top economy.
While a deal was eventually struck, the saga rattled markets and reinforced the sense of long-running deadlock on Capitol Hill that has seen the gears of government jammed up.
Though the lifting of the US debt ceiling -- a limit on government borrowing to pay for bills already incurred -- was once routine, it has for several years become a contentious partisan issue.
The downgrade is the first by a major ratings company since a similar debt impasse in 2011 saw S&P lower its top-notch classification for the United States.
White House press secretary Karine Jean-Pierre said the move "defies reality", while Treasury Secretary Janet Yellen voiced strong opposition, calling the change "arbitrary and based on outdated data".
- Key figures around 1045 GMT -
London - FTSE 100: DOWN 1.1 percent at 7,583.17 points
Frankfurt - DAX: DOWN 0.8 percent at 16,108.83
Paris - CAC 40: DOWN 0.7 percent at 7,354.33
EURO STOXX 50: DOWN 0.8 percent at 4,370.87
Tokyo - Nikkei 225: DOWN 2.3 percent at 32,707.69 (close)
Hong Kong - Hang Seng Index: DOWN 2.5 percent at 19,517.38 (close)
Shanghai - Composite: DOWN 0.9 percent at 3,261.69 (close)
New York - Dow: UP 0.2 percent at 35,630.68 (close)
Euro/dollar: DOWN at $1.0980 from $1.0985 on Tuesday
Pound/dollar: UP at $1.2783 from $1.2776
Euro/pound: DOWN at 85.88 from 85.96 pence
Dollar/yen: DOWN at 142.73 yen from 143.34 yen
Brent North Sea crude: UP 0.7 percent at $85.47 per barrel
West Texas Intermediate: UP 0.7 percent at $81.92 per barrel
S.Collins--TNT
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