US equity-index futures dropped and Treasuries yield curve steepened after Moody’s Ratings stripped the US government of its top credit rating, citing a ballooning budget deficit it said showed little sign of narrowing. Contracts for the S&P 500 dropped 1.1% and those for the Nasdaq 100 declined 1.3% as the ratings were cut one level to Aa1 from Aaa Friday. Longer-dated Treasury yields rose to touch the psychological 5% level. A gauge of the dollar weakened 0.2%. Asian stock indexes fell even as China’s industrial output expanded faster than expected in April. Bullion rose 0.4% with appetite for the haven asset boosted by mounting concerns about the US economic outlook and budget deficit. The downgrade risks reinforcing Wall Street’s growing worries over the US sovereign bond market and revives the ‘Sell America’ concerns triggered by President Donald Trump’s trade war. The rating cut comes as Capitol Hill debates even more unfunded tax cuts and the economy looks set to slow as Trump upends long-established partnerships and re-negotiates trade deals. The downgrade will add to “growing concerns about the loss of US exceptionalism and make non-US assets more appealing to global stock investors who have been rotating out of US equities into other markets like European equities,” said Vasu Menon, managing director of investment strategy at Oversea-Chinese Banking Corp. in Singapore. Moody’s joined Fitch Ratings and S&P Global Ratings in grading the world’s biggest economy below the top, triple-A position. The one-notch cut comes more than a year after Moody’s changed its outlook on the US rating to negative. The credit assessor now has a stable outlook. While Moody’s recognized the US’ significant economic and financial strengths, it no longer fully counterbalances the decline in fiscal metrics, the ratings company said. Treasury Secretary Scott Bessent downplayed concerns over the US’s government debt and the inflationary impact of tariffs, saying the Trump administration is determined to lower federal spending and grow the economy. On Monday, 10-year Treasury yields climbed four basis points to 4.52% and their 30-year equivalents rose about six basis points to 5.00%. A move through 5% for the longer-dated benchmark would put levels last seen in 2023 in play — they peaked that year at 5.18%, the highest since 2007. Shorter-dated yields are more sensitive to the path of US interest rates, with their longer-maturity counterparts influenced by expectations about the trajectory of America’s massive debt pile. A key House committee advanced Trump’s giant tax and spending package after Republican hardliners won agreement from party leaders to speed up cuts to Medicaid health coverage. The House Budget Committee approved the legislation late Sunday night after a weekend of negotiations with four ultraconservatives on the panel who on Friday joined with Democrats to reject the legislation. European Central Bank President Christine Lagarde said in an interview published with La Tribune Dimanche on Saturday that the dollar’s recent decline against the euro is counterintuitive, but reflects “the uncertainty and loss of confidence in US policies” among certain segments of the financial markets. While US assets rallied in response to previous US downgrades from Fitch and S&P, “it remains to been seen whether the market reacts differently as the haven nature of Treasury and the US dollar might be somewhat uncertain,” said Tracy Chen, a portfolio manager at Brandywine Global Investment Management. In Asia, China’s industrial output expanded faster than expected in April, highlighting the resilience of the world’s second-largest economy and feeding optimism about growth following a quick de-escalation of trade tensions with the US. Retail sales, a key gauge of consumption, rose 5.1%, versus an up-tick of 5.9% in the previous month and weaker than economists’ projection. Meanwhile, China shrank its holdings of US Treasuries in March, with the UK replacing it as the No. 2 overseas owner.
Nikkei -0.70% Hang Seng -0.19% CSI -0.33% Shanghai +0.01% Shenzen +0.21%
Eur$ 1.1186 CNH 7.2162 CNY 7.2159 JPY 145.16 GBP 1.3303 CHF 0.8362 RUB 81.0638 TRY 38.8639 WTI$ 62.18 -0.50% Gold 3,218 +0.43% BTC 102,826 -1.30% ETH 2,375 -0.81%
S&P -1.00% Nasdaq -1.24% EuroStoxx -0.04% FTSE -0.32% Dax -0.15% SMI +0.22%
Macro :
- Vietnam Says US ‘Basically’ Agrees With Its Proposals in Talks
- Trump Puts Wealth Fund on Back Burner as Ambitions Hit Limits
- Trump Puts Wealth Fund on Back Burner as Ambitions Hit Limits
- Lutnick-Built FMX to Start Treasury Futures Trade in Blow to CME
- Wall Street Strategists React to Moody’s US Credit Rating Cut
- Portugal Eases Limits on Power Imports From Spain After Blackout
- Brookfield and Goldman Join Wall Street’s Rush to Dubai Property
Keep an eye on :
Keep an eye on :
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