A look at the day ahead in European and global markets from Brigid Riley<\/p>\n\n\n\n
Fitch delivered the markets a doozy of a surprise with an unexpected downgrade of the U.S. government’s credit rating, by one notch to AA+ from AAA, citing concerns over governance and U.S. debt.<\/p>\n\n\n\n
The U.S. government naturally delivered some sharp comebacks in response to the move, which came months after the Biden administration scraped together a deal with conservative lawmakers to avoid a debt ceiling crisis.<\/p>\n\n\n\n
The market reaction so far has been fairly mild.<\/p>\n\n\n\n
U.S. Treasury yields eased back a touch as investors ironically sought the safety of U.S. sovereign debt, while the dollar also benefited, ticking up against a basket of major peers.<\/p>\n\n\n\n
The reaction was a little more pronounced in equities, with\u00a0S&P 500\u00a0and\u00a0Nasdaq futures\u00a0slipping around 0.5% each.<\/p>\n\n\n\n
Japan’s Nikkei\u00a0suffered a 1.8% drop, but that’s after hovering near post-Bubble highs for most of the past two months.<\/p>\n\n\n\n
Chinese markets also took a big hit, led by a 2% drop for Hong Kong’s\u00a0Hang Seng. But again, these are markets that had been supported by now-waning hopes for big-bang economic stimulus from Beijing.<\/p>\n\n\n\n
China’s post-pandemic economic recovery is looking increasingly shaky, judging from the data, with factories and services activity adding to the gloom earlier in the week.<\/p>\n\n\n\n
Key developments that could influence markets on Wednesday:<\/p>\n\n\n\n
– U.S. July ADP report<\/p>\n\n\n\n
– Swiss PMI and consumer confidence<\/p>\n\n\n\n
– Spain international tourism arrivals<\/p>\n