Title: International Stock Markets React to Fitch Downgrade of US Debt Rating
Subtitle: Analysts Expect Limited Impact on Markets Despite Credit Agency’s Decision
Madrid/New York – The global stock markets experienced losses on Wednesday following the credit rating downgrade of the United States debt by Fitch Ratings. Despite the downgrade, analysts believe that the decision will have minimal impact on the markets.
Fitch Ratings announced the downgrade of the United States‘ long-term debt on Tuesday afternoon, after the main stock markets in the country had already closed for the day. This news was met with a less favorable response from the Asian markets, which were the first to open on Wednesday. The Hong Kong stock market fell by 2.47%, Tokyo by 2.3%, Seoul by 1.9%, Shanghai by 1.29%, and the Australian stock market fell by 0.89%.
Following suit, the European markets also registered significant losses during the first part of the trading session, although they later recovered slightly, except for Madrid. The Spanish stock market experienced a decline of 1.83%, while London and Frankfurt fell by 1.36% each. Milan saw a decrease of 1.3%, Paris dropped by 1.26%, and the Euro Stoxx 50, consisting of Europe’s best-listed companies, lost 1.61%.
Meanwhile, on Wall Street, the Dow Jones industrial index, the main indicator, closed with a decline of 0.98%. The selective S&P 500 experienced even greater losses, falling by 1.38%. Notably, the technology-heavy Nasdaq saw the biggest loss for a trading day since February, which analysts had anticipated given the strong comeback of the sector this year.
Although the Fitch downgrade created some market unease, analysts have highlighted that its overall impact is expected to be limited. The yield on US bonds is still around 4%, indicating that US risk assets such as stock markets, bonds, and the dollar will continue to be seen as safe investments.
Fitch’s downgrade has also sparked controversy, with critics such as JPMorgan Chase CEO, Jamie Dimon, referring to it as “ridiculous.” Dimon emphasized that the stability created by the US economy is integral to the stability of other countries.
Despite the limited effect on the market, the US government expressed its disagreement with the downgrade, with Treasury Secretary Janet Yellen criticizing Fitch’s decision as being based on outdated data.
At the close of the stock market, the yield of the 10-year US bond rose slightly to 4.069%. In the eurozone, interest rates on debt also moderated compared to the morning, with Germany’s safest bond standing at 2.524%, 2.7 basis points lower than the previous day.
Furthermore, the price of a barrel of Brent oil, a reference in Europe, closed with a drop of 2.01%, while West Texas Intermediate (WTI), a reference in the US and Puerto Rico markets, decreased by 2.31%.
As the markets continue to digest the impact of the rating downgrade, the global economic landscape remains uncertain.