Market Update
Equities in Asia opened lower early Monday, reacting to the news of an unprecedented credit-rating downgrade of United States late Friday.
Japan's Nikkei plunged 2.3% while Australia's S&P/ASX All Ordinaries also fell 2.3%. Hong Kong's Hang Seng plummeted 4% while mainland China's Shanghai Composite was leading losses in the region, down 3.7%. The Sensex declined 3%.
On Friday, ratings agency Standard & Poor's downgraded the U.S.' long-term debt rating from 'AAA' to 'AA+' with a negative outlook, citing uncertainty over its long-term fiscal path and also lack of political consensus on how to address the issue.
With the United States' debt levels moving close to 100% of its gross domestic product and with policymakers--as was seen during the recent debt-ceiling issue--bickering over how to reduce deficits, Friday's downgrade was the first in the nation's history.
"Global financial markets will reopen on Monday to a changed reality," Mohamed El-Erian, CEO and Co-CIO of Pimco, the world's biggest bond manager, wrote in a column over the weekend. "There will now be genuine uncertainties as to wider systemic impact of this change."
U.S. Treasury Secretary Timothy Geithner slammed the agency over the downgrade, terming the move a "terrible judgment", which showed a "stunning lack of knowledge".
Gold prices rose more than 2% in Asian trading, the U.S. dollar fell against most peers while U.S. stock index futures fell over 2%. Crude oil dropped.
Stocks on the Move
In Tokyo, heavyweights Sony and Toyota declined 2.3% and 1.8%, respectively. Financials Sumitomo Mitsui, Mitsubishi UFJ and Mizuho lost between 1.7% and 2.1%.
Hong Kong shares suffered broad losses with property, oil and financial stocks all witnessing selling.
Henderson Land tumbled 3.8% in early trade, CNOOC was off 2.5% while Bank of China erased 2.7%.
Chinese shares also traded lower with metal stocks falling the most as commodity prices took a hit. Aluminum Corporation of China climbed down 1.5%.
Indian finance minister Pranab Mukherjee allayed growth concerns saying India will be able to sustain growth on the basis of its strong fundamentals but the stock markets reacted to the global crisis anyway with all of the stocks in the 30-share benchmark Sensex trading lower.
Top losers included Wipro, DLF, Tata Motors, Tata Steel, TCS, Infosys, Airtel and Jindal Steel, all down in a range between 3.9% and 7.2%.
In Sydney, Anglo-Australian miner BHP Billiton was off 1.7% in early trade while National Australia Bank fell 2%.