Global shares dipped yesterday after Wall Street took a step back from its big rally as markets tried to digest a slew of earnings.
Investor optimism was also hurt by Fitch Ratings downgrading the US government’s credit rating, citing a growing federal debt burden and an “erosion of governance” that has manifested in debt limit standoffs.
The rating was cut on Tuesday one notch to “AA+” from “AAA,” the highest possible rating.
Photo: EPA-EFE
In 2011, ratings agency Standard & Poor’s stripped the US of its prized “AAA” rating.
The move follows a long, drawn-out row between Republicans and Democrats earlier this year over raising the US borrowing ceiling, which had fueled fears of a devastating default by the world’s top economy.
While a deal was eventually struck, the saga rattled markets and reinforced the sense of long-running deadlock on Capitol Hill that has seen the gears of government jammed up.
US Secretary of the Treasury Janet Yellen said the move by Fitch was based on outdated data, adding that the US economy has rapidly recovered from the COVID-19 pandemic recession.
“Some negativity was permeating across Asian equity markets mid-week thanks to Fitch downgrade news. Whilst not a game-changer, news that Fitch downgraded the US credit rating by a notch was enough to put risk appetite on the back foot, as evidenced by the red numbers across the board,” KCM Trade chief market analyst Tim Waterer said.
Shares in Taipei fell 1.85 percent as profit-taking added to the selling of artificial intelligence (AI)-concept stocks, with the TAIEX ending down 319.14 points at 16,893.73.
As investors pocketed recent gains amid the AI frenzy, Wistron Corp (緯創) lost 10 percent, Quanta Computer Inc (廣達) dropped 9.92 percent, Wiwynn Corp (緯穎) declined 9.86 percent and Lite-On Technology Corp (光寶科技) fell 9.74 percent, Taiwan Stock Exchange data showed.
Elsewhere in Asia, Japan’s benchmark Nikkei 225 slumped 2.3 percent to finish at 32,707.69. Australia’s S&P/ASX 200 fell 1.3 percent to 7,354.60. South Korea’s KOSPI slid 1.9 percent to 2,616.47. Hong Kong’s Hang Seng dipped 2.5 percent to 19,517.38, while the Shanghai Composite lost 0.9 percent to 3,261.69.
In Europe, France’s CAC 40 fell 1.3 percent to 7,311.42 in early trading, while Germany’s DAX dipped 1.4 percent to 16,007.22. Britain’s FTSE 100 dropped 1.8 percent to 7,531.78.
Still, SPI Asset Management managing partner Stephen Innes said the outlook was positive.
“While debt downgrades seldom, if ever, have long legs, investors may pause and let the dust settle before re-entering risk markets,” he said in a note.
“However, within this super market-friendly environment of stable growth and a Fed close to the end of its hiking cycle creating fertile ground for stock gains, it’s unlikely risk sentiment will wander too far off the soft landing path,” he wrote, referring to the US Federal Reserve.
Additional reporting by staff writer and AFP
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