The FTSE 100 is forecasted to commence with a downward trend, following the US credit rating’s downgrade by Fitch, a decision deemed “arbitrary” by the US Treasury Secretary.
European stock markets, including the UK’s leading index, are bracing for drops in the wake of the world’s most potent economy losing its premier AAA credit standing, just two months after nearly defaulting on its debts.
Fitch’s decision to lower the US rating from AAA to AA+ mirrors a similar move made by S&P Global Ratings over a decade ago.
Janet Yellen, the US Treasury Secretary, expressed strong disagreement with Fitch’s decision, describing the rating alteration as “arbitrary and reliant on outdated information.”
She pointed out, “Fitch’s quantitative ratings model experienced a substantial drop between 2018 and 2020 — and yet Fitch is implementing its change now, despite the visible progress in many indicators that Fitch utilizes for its decision.”
Asian equities and US Treasury yields witnessed a downturn after Fitch, the ratings agency, unexpectedly lowered the United States’ highest sovereign credit rating.
The MSCI’s comprehensive Asia-Pacific shares index dipped by 1.9%. Japan’s Nikkei saw a 1.8% fall, while Australian stocks plunged by 2.3%.
China’s primary benchmark and Hong Kong’s indices declined by 0.9% and 2.2%, respectively, as some investors cashed in gains amid the lack of significant and effective actions by Beijing to bolster a stuttering economy.
The FTSE 100 is set to start the day with a 0.5% drop when markets initiate trading later.
In premarket trading, the Euro Stoxx 50, spanning the pan-region, was down by 0.7%, while the German DAX declined by 0.8%.
US 10-year Treasury yields fell roughly two basis points to 4.03% in Tokyo.
