Beijing (AP) – Asian stock markets experienced a downward trend on Thursday, mirroring the decline on Wall Street, after Fitch Ratings downgraded the United States government’s credit rating.
Tokyo’s market benchmark, the Nikkei 225, fell by almost 1.5%, reaching 32,244.08, while the Shanghai Composite Index lost 0.2% and closed at 3,254.37. Hong Kong’s Hang Seng retreated 0.5% to 19,429.17, and Seoul’s Kospi gave up 0.8% to 2,597.36. In Sydney, the S&P-ASX 200 declined 0.5% to 7,318.20. Jakarta experienced gains, but other Southeast Asian markets declined.
The plunge came after Fitch Ratings lowered its rating on U.S. government debt from AAA to AA+. The agency cited the rising debt and a “steady deterioration in standards of governance” as the reasons behind the downgrade. The downgrade marks the second time the U.S. has lost its highest AAA rating, with the first occurrence happening in 2011 after a fight over the government’s borrowing limit.
Fitch’s decision has significant implications for the global financial system since U.S. Treasuries are considered one of the safest investments. The agency pointed out repeated standoffs in Congress as a potential risk for causing the government to default.
Despite the rating cut, some analysts like Kristina Hooper of Invesco consider it largely irrelevant, stating that it brings the U.S. rating more in line with other major economies. The timing of the downgrade is also questioned as it occurred well after the debt ceiling issue was resolved.
Investors are now closely monitoring the U.S. economy to see if it can avoid a potential recession. The economy has faced challenges due to repeated interest rate hikes aimed at curbing inflation. A report by payroll processor ADP indicated that hiring in the private sector remains stronger than expected, which could dampen recession fears. However, stronger hiring might also prompt the Federal Reserve to take action against upward pressure on prices.
In response to the market downturn, Microsoft, Nvidia, and Amazon all saw their shares drop by over 2.5%. Generac Holdings, a company selling generators and power products, experienced the biggest drop in the S&P 500, plummeting by 24.4% after reporting weaker profits than analysts anticipated. SolarEdge Technologies also suffered a significant drop of 18.4% after reporting lower than forecasted profit and revenue growth, citing higher interest rates pressuring U.S. residential customers.
On the positive side, some companies like CVS Health and Humana managed to beat profit expectations, leading to increases in their stock prices.
In energy markets, benchmark U.S. crude slightly rose by 7 cents to $79.56 per barrel on the New York Mercantile Exchange, while Brent crude, the basis for international oil trading, gained 8 cents to reach $83.28 per barrel in London.
The currency market saw the dollar holding steady at 143.28 yen, while the euro declined slightly to $1.0934 from $1.0943.
Investors are anxiously awaiting the U.S. government’s comprehensive report on the jobs market, set to be released on Friday, as Federal Reserve Chair Jerome Powell has indicated that this data will significantly influence the central bank’s decision in September.
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