Following Wall Street’s decline on Thursday when Fitch Ratings lowered the credit rating of the US government, Asian stock markets also declined.
The benchmark Tokyo market plummeted by about 1.5%. Seoul, Shanghai, and Hong Kong all said no. Oil costs grew somewhat.
After Fitch Ratings downgraded the U.S. government credit rating by one level on Wednesday, Wall Street experienced its steepest one-day loss in months. After Congress brought Washington very close to defaulting before agreeing to increase the amount it may borrow, the agency highlighted rising debt and a “steady deterioration in standards of governance”.
“This is largely irrelevant despite some initial shock,” said Kristina Hooper of Invesco in a report, noting that this makes the U.S. rating more consistent with other major economies. “The timing was odd, given that it occurred well after the debt ceiling issue was resolved.”
In Tokyo, the Nikkei 225 down 1.4% to 32,244.08, and in Shanghai, the Shanghai Composite Index fell 0.2% to 3,254.37. Hong Kong’s Hang Seng fell 0.5% to 19,429.17.
The S&P-ASX 200 in Sydney fell 0.5% to 7,318.20, while the Kospi in Seoul lost 0.8% to 2,597.36. New Zealand and other Southeast Asian markets decreased, although Jakarta rose.
After Fitch lowered its rating on U.S. government debt from its highest AAA to AA+ by one level, the S&P 500 fell 1.4% to 4,513.39. Following last week’s 16-month high, it was the benchmark market’s second straight decline.
To 35,282.52, the Dow Jones Industrial Average fell 1%. To 13,973.45, the Nasdaq composite decreased 2.2%.
Due to the fact that U.S. Treasury bonds are among the safest potential assets, the Fitch downgrading is devastating to the foundation of the global financial system. The agency listed a number of reasons, including as the ongoing stalemate in Congress over whether to declare a state of emergency.
After a dispute over the government’s borrowing cap, Standard & Poor’s revoked the United States’ AAA rating in 2011. The budget impasse, according to a later assessment by the Government Accountability Office, increased borrowing costs by $1.3 billion in that year.
Investors are keeping a close eye on the American economy to see if it can avoid the recession that was widely anticipated in the wake of repeated interest rate increases to curb inflation.
The S&P 500 rose by 19.5% in the first seven months of this year as a result of traders’ recent increased optimism.
