BEIJING (`) – Asian stock markets were mixed on Thursday after Fitch Ratings downgraded the US government’s credit rating.
Tokyo’s market gauge fell more than 1%. Shanghai and Hong Kong won. Oil prices rose slightly.
After Fitch Ratings cut the US government’s credit rating by one notch on Wednesday, Wall Street experienced its biggest one-day decline in months. The agency cited mounting debt and a “steady deterioration in government standards” after Congress brought Washington to the brink of default before approving an increase in the loan amount.
“This is largely irrelevant despite an initial shock,” Invesco’s Kristina Hooper said in a report, noting that this makes the US’s assessment more consistent relative to other major economies. “The timing was odd considering it came long after the debt ceiling was resolved.”
Tokyo’s Nikkei 225 fell 1.3% to 32,293.33, while the Shanghai Composite Index rose 0.4% to 3,273.68. Hong Kong’s Hang Seng gained 0.6% to 19,636.34.
Seoul’s Kospi slipped 0.5% to 2,604.89 and Sydney’s S&P ASX 200 fell 0.7% to 7,300.50.
India’s Sensex opened down 0.2% at 65,666.36. Jakarta rose while New Zealand and other Southeast Asian markets declined.
The S&P 500 was down 1.4% on Wednesday at 4,513.39 after Fitch cut its US sovereign debt rating one notch from AAA to AA+. It was the second consecutive loss for the market benchmark after last week’s 16-month high.
The Dow Jones Industrial Average fell 1% to 35,282.52. The Nasdaq Composite fell 2.2% to 13,973.45.
Fitch’s downgrade hits the heart of the global financial system, with US Treasuries considered some of the safest investments out there. The agency cited, among other things, repeated disagreements in Congress over whether to default the government.
Standard & Poor’s stripped the US of its AAA credit rating in 2011 after a dispute over the government’s credit limit. The Government Accountability Office later estimated that the fiscal crisis added $1.3 billion to borrowing costs that year.
The story goes on
Investors are watching if the US economy can avoid a recession that was widely expected after repeated hikes in interest rates to cool inflation.
Traders have been more optimistic of late, helping the S&P 500 surge 19.5% in the first seven months of this year.
A report on Wednesday by payroll processor ADP suggested that private sector hiring was higher than expected, although it was slower in July from the previous month. Strong hiring could help dampen fears of a recession, but could also convince the Federal Reserve that there is too much upward pressure on prices.
The US government will release a more comprehensive report on the jobs market on Friday. Fed Chair Jerome Powell has warned that Friday’s numbers have a major bearing on the central bank’s next move in September.
On Wall Street, Microsoft, Nvidia and Amazon each fell more than 2.5%.
Generac Holdings, which sells generators and other energy products, fell 24.4%, posting the biggest drop in the S&P 500 after the company reported weaker earnings than analysts had expected. SolarEdge Technologies plunged 18.4% after reporting weaker than forecast earnings and revenue growth. It was said that higher interest rates were putting pressure on US retail customers.
Other companies have beaten earnings expectations.
CVS Health rose 3.3% after the company reported a smaller-than-expected decline in earnings. Humana rose 5.6% after beating expectations.
In energy markets, benchmark U.S. crude rose 13 cents to $79.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.88 the previous day to $79.49. Brent crude, the price basis for international oil trading, rose 17 cents to $83.37 a barrel in London. In the previous session, it lost $1.71 to $83.20.
The dollar rose to 143.72 yen from 143.28 yen on Wednesday. The euro fell from $1.0943 to $1.0931.
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