The U.S. government’s credit rating was downgraded by one rung by Fitch Ratings on Wednesday, causing Wall Street to endure its largest one-day fall 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”.
Global markets
Given that U.S. Treasuries are among the safest potential assets, the Fitch downgrading seriously undermines the foundation of the global financial system. The Nasdaq composite sank 2.2%, while the Dow fell 1%.
In Asia, the Shanghai Composite Index increased 0.6% to 3,280.46, the Hang Seng in Hong Kong declined 0.5% to 19,420.87, and the Nikkei 225 in Tokyo fell to 32,159.28.
- Fitch Ratings downgrade the US government‘s credit rating, causing Wall Street’s largest one-day drop.
- Fitch downgrades US Treasuries, threatening the global financial system.
- Upbeat traders boost S&P 500’s 19.5% increase, private sector hiring stronger.
The S&P-ASX 200 in Sydney fell 0.6% to 7,311.70, while the Kospi in Seoul lost 0.4% to 2,605.39. The Sensex in India dropped 1% to 65,116.42. While New Zealand and other Southeast Asian markets fell, Jakarta rose.
Investors are closely monitoring the American economy to determine whether it can evade the recession that was widely expected in the wake of repeated interest rate increases to combat inflation.
Recently, traders have been more upbeat, which has contributed to the S&P 500’s 19.5% increase for the first seven months of this year. Even while it decreased in July compared to June, a report from payroll processor ADP revealed hiring in the private sector remains stronger than anticipated.
The U.S. government will release more detailed jobs statistics on Friday, and Fed Chair Jerome Powell has said that the data will have a significant impact on the central bank‘s decision to move forward in September.
