Markets Plunge; S&P, US Spar Over Rating Cut
Global financial markets dropped sharply Monday in reaction to an unprecedented downgrade of the U.S. government's credit rating and continued concerns about European debt problems and global growth.
The S&P 500, an index that measures U.S. stock market activity. was down more than 6.5 percent Monday afternoon, and has dropped more than 10 percent since the beginning of the year. Major indexes across Asia closed between two percent and four percent lower Monday, and European stocks were down more than three percent.
Monday's trading sessions were the first chance for most investors to react to the change in the Standard & Poor's rating, which was announced Friday evening after world markets had closed. U.S. government debt is now rated "AA+," one level below the highest possible rating of "AAA."
U.S. President Barack Obama said he disagreed with the S&P downgrade, but he hopes it will prompt lawmakers in Washington to agree on what he called a balanced approach to debt and deficit reduction - including higher taxes for the wealthy and cuts in spending on social programs. Mr. Obama said, however, that the financial markets "continue to believe our credit is triple-A."
S&P held a conference call Monday to defend its decision to downgrade the United States. Managing Director John Chambers, head of the committee that made the ratings decision, said increasing debt levels in the United States and the inability of Congress and the president to reach political consensus for significant deficit reductions were "no longer comparable with the most highly rated governments."
U.S. Treasury Secretary Timothy Geithner says the S&P used "terrible judgment" when it downgraded the U.S. credit rating. Geithner says the S&P showed a "stunning lack of knowledge" about the mathematics used to draw up a federal budget.
In Europe, markets in Italy and Spain rose sharply Monday after the European Central Bank said it would buy government bonds from both countries in an effort to calm fears about the eurozone debt crisis. But other major European markets lost ground.
Geithner said the United States has a very resilient and strong economy. He said U.S. treasuries are an absolute safe investment and that there is no risk of the United States not being able to meet its obligations.
The other two major credit rating agencies - Moody's and Fitch - have so far kept the U.S. triple-A rating.
S&P blamed Congress for months of political haggling over a deficit reduction deal that S&P says does not go far enough. The deal calls for cutting the deficit by more than $2 trillion over 10 years. S&P called for $4 trillion in savings.
S&P lists 5 pillars in its Sovereign Rating Framework as:
Institutional effectiveness and political risks, reflected in the political score
Economic structure and growth prospects, reflected in the economic score
External liquidity and international investment position, reflected in the external score
Fiscal performance and flexibility, as well as debt burden, reflected in the fiscal score
Monetary flexibility, reflected in the monetary score
(Source: Standard & Poor's Sovereign Rating Framework)
fuente: http://www.voanews.com/
The S&P 500, an index that measures U.S. stock market activity. was down more than 6.5 percent Monday afternoon, and has dropped more than 10 percent since the beginning of the year. Major indexes across Asia closed between two percent and four percent lower Monday, and European stocks were down more than three percent.
Monday's trading sessions were the first chance for most investors to react to the change in the Standard & Poor's rating, which was announced Friday evening after world markets had closed. U.S. government debt is now rated "AA+," one level below the highest possible rating of "AAA."
U.S. President Barack Obama said he disagreed with the S&P downgrade, but he hopes it will prompt lawmakers in Washington to agree on what he called a balanced approach to debt and deficit reduction - including higher taxes for the wealthy and cuts in spending on social programs. Mr. Obama said, however, that the financial markets "continue to believe our credit is triple-A."
S&P held a conference call Monday to defend its decision to downgrade the United States. Managing Director John Chambers, head of the committee that made the ratings decision, said increasing debt levels in the United States and the inability of Congress and the president to reach political consensus for significant deficit reductions were "no longer comparable with the most highly rated governments."
U.S. Treasury Secretary Timothy Geithner says the S&P used "terrible judgment" when it downgraded the U.S. credit rating. Geithner says the S&P showed a "stunning lack of knowledge" about the mathematics used to draw up a federal budget.
In Europe, markets in Italy and Spain rose sharply Monday after the European Central Bank said it would buy government bonds from both countries in an effort to calm fears about the eurozone debt crisis. But other major European markets lost ground.
Geithner said the United States has a very resilient and strong economy. He said U.S. treasuries are an absolute safe investment and that there is no risk of the United States not being able to meet its obligations.
The other two major credit rating agencies - Moody's and Fitch - have so far kept the U.S. triple-A rating.
S&P blamed Congress for months of political haggling over a deficit reduction deal that S&P says does not go far enough. The deal calls for cutting the deficit by more than $2 trillion over 10 years. S&P called for $4 trillion in savings.
S&P lists 5 pillars in its Sovereign Rating Framework as:
Institutional effectiveness and political risks, reflected in the political score
Economic structure and growth prospects, reflected in the economic score
External liquidity and international investment position, reflected in the external score
Fiscal performance and flexibility, as well as debt burden, reflected in the fiscal score
Monetary flexibility, reflected in the monetary score
(Source: Standard & Poor's Sovereign Rating Framework)
fuente: http://www.voanews.com/
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