Markets Rattled by U.S. Credit Downgrade, China Rate Cut, and Rising Global Bond Yields

The U.S. credit downgrade by Moody’s rattled global markets on Monday, igniting fears over the nation’s $36 trillion debt burden and fiscal sustainability. The downgrade drove long-term Treasury yields to multi-year highs and pressured the U.S. dollar, while global equities and currencies responded to shifting risk sentiment. As policymakers in China and Japan took action to address domestic challenges, investors reassessed safe-haven assets and global growth prospects.

🇺🇸 United States

Equities:
The S&P 500 edged up 0.1% to 5,963.60, while the Dow Jones Industrial Average rose 0.3%. The Nasdaq closed little changed.

Bonds:
The 30-year Treasury yield surged to 5%, its highest in 18 months, reflecting investor concerns over the U.S. fiscal outlook.

Currency:
The U.S. Dollar Index (DXY) fell to 100.91, its lowest in a week, as the downgrade undermined confidence in the greenback.

🇪🇺 Eurozone

Equities:
The Stoxx Europe 600 index closed 0.1% higher, recovering from earlier losses driven by U.S. credit concerns and trade tensions.

Bonds:
German 10-year bund yields edged up to 2.5%, as investors weighed the implications of the U.S. downgrade on global markets.

Currency:
The euro strengthened against the dollar, with EUR/USD rising to 1.1230, benefiting from the dollar’s weakness.

🇬🇧 United Kingdom

Equities:
The FTSE 100 index faced pressure from global market jitters but found support later in the session, closing modestly lower.

Bonds:
UK 10-year gilt yields increased to 4.665%, influenced by rising U.S. Treasury yields and domestic inflation concerns.

Currency:
Sterling rose to 1.3403 against the dollar, its highest since April, buoyed by the UK’s trade agreement reset with the EU and the dollar’s decline.

🇨🇳 China

Equities:
The Shanghai Composite Index slipped to 3,373.60, as investors digested mixed economic data and awaited further policy support.

Bonds:
China’s central bank cut the one-year loan prime rate by 10 basis points to 3.0%, aiming to stimulate the economy amid ongoing trade tensions.

Currency:
The yuan weakened slightly, with USD/CNY trading at 7.2149, as monetary easing measures weighed on the currency.

🇯🇵 Japan

Equities:
The Nikkei 225 index declined for the fourth consecutive session, closing at 37,498.63, amid concerns over fiscal policy and rising bond yields.

Bonds:
Japan’s 20-year bond auction saw the weakest demand since 2012, with the 10-year yield climbing to 1.525%, reflecting investor unease over fiscal sustainability.

Currency:
The yen appreciated slightly against the dollar, with USD/JPY at 144.95, as safe-haven demand increased amid global market volatility.

🌍 EMEA

Equities:
European markets were subdued, with investors cautious amid U.S. fiscal concerns and ongoing trade disputes.

Bonds:
Eurozone bond yields edged higher, tracking the rise in U.S. Treasury yields, as markets reassessed risk premiums.

Currency:
Emerging market currencies faced pressure from a stronger dollar and global risk aversion, leading to modest declines across the board.

🛢️ Commodities & 🪙 Crypto

Commodities:

• Gold: Prices rose as investors sought safe-haven assets amid market uncertainty.
• Oil: Brent crude prices declined, reflecting concerns over global demand and economic growth.

Cryptocurrencies:

• Bitcoin: Prices remained stable, hovering around recent levels, as markets awaited further regulatory developments.

Top Performers:

• Equities: S&P 500 (+0.1%), Dow Jones (+0.3%)
• Currencies: EUR/USD (+0.58%), GBP/USD (+0.55%)
• Commodities: Gold (up), Oil (down)

Key Headlines:

• Moody’s downgrades U.S. credit rating, citing fiscal concerns.
• China cuts benchmark lending rates to support the economy.
• Japan’s bond auction sees weakest demand since 2012.