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Stock market today: Global stocks decline after the US government's credit rating was cut
Global stock markets and Wall Street futures declined Thursday after Fitch Ratings cut the US government's credit rating.
Beijing: Global stock markets and Wall Street futures declined Thursday after Fitch Ratings cut the US government's credit rating.
London and Paris opened lower. Tokyo lost 1.7 per cent and Hong Kong also declined. Shanghai advanced. Oil prices retreated. Wall Street turned in its biggest one-day decline in months Wednesday after Fitch Ratings lowered the US government credit rating by one level. The agency cited rising debt and a “steady deterioration in standards of governance” after Congress pushed Washington close to defaulting before agreeing to raise the amount it can borrow. “This is largely irrelevant despite some initial shock,” Kristina Hooper, chief global market strategist at investment management company Invesco, said in a report, noting that this makes the US rating more consistent with other major economies. “The timing was odd, given that it occurred well after the debt ceiling issue was resolved.”
In early trading, the FTSE 100 in London lost 1.3 per cent to 7,466.49. The CAC 40 in Paris retreated 0.9 per cent to 7,246.21, and the DAX in Frankfurt gave up 0.8 per cent to 15,883.21. On Wall Street, the future for the benchmark S&P 500 index was 0.3 per cent lower. For the Dow Jones Industrial Average, it declined 0.2 per cent. The S&P 500 sank 1.4 per cent on Wednesday after Fitch cut the US government debt rating from the highest level of AAA to AA+. It was the second-straight loss for the market benchmark after last week's 16-month high. The Dow dropped 1 per cent, and the Nasdaq composite fell 2.2 per cent. In Asia, the Nikkei 225 in Tokyo tumbled to 32,159.28 and the Hang Seng in Hong Kong lost 0.5 per cent to 19,420.87. The Shanghai Composite Index rose 0.6 per cent to 3,280.46. The Kospi in Seoul gave up 0.4 per cent to 2,605.39, and Sydney's S&P-ASX 200 declined 0.6 per cent to 7,311.70.
India's Sensex lost 1 per cent to 65,116.42. Jakarta gained while New Zealand and other Southeast Asian markets declined. The Fitch downgrade strikes at the core of the global financial system because US Treasuries are considered some of the safest possible investments. The agency cited repeated standoffs in Congress about whether to cause the government to default, among other factors. Standard & Poor's stripped the US of its AAA rating in 2011 after a fight over the government's borrowing limit. The Government Accountability Office later estimated that budget standoff raised borrowing costs by USD 1.3 billion that year. Investors are watching whether the US economy can avoid a recession that was widely expected following repeated interest rate hikes to cool inflation. Traders have been more optimistic lately, helping to push up the S&P 500 by 19.5 per cent for the first seven months of this year.
A report Wednesday by payroll processor ADP suggested hiring in the private sector is stronger than expected, even if it slowed in July from the previous month. Strong hiring could help to dampen fears of a recession but also might persuade the Federal Reserve there is too much upward pressure on prices. The US government is due to issue more comprehensive jobs data Friday. Fed Chair Jerome Powell has pointed to Friday's numbers as a big influence on the central bank's next move in September. On Wall Street, Microsoft, Nvidia and Amazon each fell more than 2.5 per cent on Wednesday. Generac Holdings, which sells generators and other power products, tumbled 24.4 per cent for the biggest drop in the S&P 500 after it reported weaker profit than analysts expected. SolarEdge Technologies dropped 18.4 per cent after reporting weaker profit and revenue growth than forecast.
It said higher interest rates were pressuring US residential customers. Other companies have been beating profit expectations. CVS Health rose 3.3 per cent after it reported a milder drop in results than expected. Humana climbed 5.6 per cent after it topped expectations. In energy markets, benchmark US crude lost 43 cents to USD 79.06 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell USD 1.88 the previous day to USD 79.49. Brent crude, the price basis for international oil trading, gave up 54 cents to USD 82.66 per barrel in London. It lost USD 1.71 the previous session to USD 83.20. The dollar rose to 142.89 yen from Wednesday's 143.28 yen. The euro declined to USD 1.0927 from USD 1.0943.
