US ratings downgrade drags down global markets
Slight ratings drop fuels panic selling across global markets as edgy investors re-allocate to safer funds. August 09, 2011 | Timothy ShimThe immediate reaction to Standards & Poor’s Saturday downgrade of US long term ratings has been a massive slump in global markets, starting in the Asia region and continued in the US as the Dow plunged more than 600 points on opening. Asia markets opened low yesterday following a failure of the Dow to rally, with stock across the region sold off sharply as concerns over an economic slowdown mount. According to reports by Royal Bank of Scotland research, by noon Monday, equities and credit markets were hit especially hard, with S&P 500 futures expiring in September down 2.3%. Indonesia, Singapore, Hong Kong and Korea fell by 4% or more, while China, Taiwan and Malaysia were down by over 3%. Other markets saw losses of over 2%, except Thailand, which was down the least at -1.7%. The downgrade by S&P in fact reflects only a minor concern regarding the ability of the US to repay long term loans and by right should not overly affect the market so drastically. In fact, the downgrade tells us nothing about the US which we did not know even before it happened – that the country is having issues in the way it runs its economy, as well as having to bear the added burden of politicking. Since technically an AAA rating differs very slightly from an AA+ rating, edgy investors err on the side of caution rather than face another “disaster of 2008”, little realising that by rapid short-selling, they are in fact contributing to what they themselves might be turning into a disaster. After two days of trading in Asia, despite the almost non-stop slump, we see not a total withdrawal of investments, but what may be the sale of high-risk investments with some re-allocation to safer buys, such as indicated by the slight rally on the Nikkei. A more tempered position has been taken by Moody's, which maintained an Aaa rating for the US as it believes “that the US continues to exhibit the characteristics compatible with (the ratin... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Exchanges, Markets & ExchangesExchanges,Markets Exchanges, Exchanges,Markets & Exchanges, Keywords:S&P, Nikkei, RBS, Moody's, BNY Mellon S&P, Nikkei, RBS, Moody's, BNY Mellon
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