Asian stocks and U.S. Treasury yields declined Wednesday after Fitch unexpectedly downgraded the U.S. sovereign credit rating. The MSCI Asia Pacific index slid 1.9% while Japan's Nikkei dropped 1.8%. Chinese and Hong Kong stocks also fell.
U.S. stock futures pointed to falls of around 0.2% at the open. European stock futures were also lower.
Fitch cut the U.S. rating to AA+ from AAA, citing likely fiscal deterioration. While the initial reaction in markets was contained, the downgrade injected some uncertainty.
U.S. 10-year Treasury yields declined by around 2 basis points to 4.025%. Investors fled to the safety of sovereign debt from riskier stocks. The U.S. dollar was up slightly against major currencies. Japan's 10-year bond yield hit a 9-year peak.
Analysts say central banks, earnings, China stimulus and geopolitics remain key focuses beyond the downgrade. Fresh U.S. jobless and unemployment data will be released later this week.
Oil prices gained, trading near their highest since April, after a larger-than-expected draw in U.S. crude inventories. West Texas Intermediate crude futures rose 0.9% to $82.07 a barrel.
In summary, stocks declined and bond yields fell after Fitch downgraded the U.S. credit rating, citing concerns over the country's fiscal situation. However, the initial market reaction was contained.
