Added by Erik West on August 8, 2011
Australian and New Zealand stock markets opened lower on Monday following the decision by US-based credit rating agency Standard & Poor’s to downgrade the US government’s AAA credit rating to AA+.
The Australian and New Zealand stock markets are the first to open on Monday’s trading day, following the credit rating downgrade. Australia’s All Ordinaries index was down 2.3% at 4,076 points and the S&P/ASX-200 index was down 2.2% to 4,015 points at the opening of trading; the indices had recovered a little at the time of publication yet were still in negative territory. New Zealand’s benchmark NZX 50 was down by 3.2% to 3,171.
Prior to the opening, finance officials from the G-7 issued a joint statement pledging increased cooperation to handle economic issues and were committed to taking all necessary measures to support growth and financial stability. The statement followed an emergency conference call that discussed market prospects and the eurozone debt crisis. This level of activity on a Sunday in August (during the midst of a hot summer in the northern hemisphere) demonstrates how the twin debt crises in the US and eurozone have unsettled financial markets and increased fears the debt problems could derail the world’s recovery from the 2007-2009 financial crisis.
IMF chief Christine Lagarde has welcomed pledges made by the G-7 as well as the European Central Bank, France, and Germany, to take all necessary measures to stabilize the financial markets. “This cooperation will contribute to maintaining confidence and spurring global economic growth,” said Lagarde in a statement.
Many economists see the world’s central banks as a list line of defence in light of lawmakers’ failure to agree about key moves demanded by investors around the world.
In related news, the European Central Bank said it will buy Spanish and Italian bonds to drive down interest yields; bonds usually offer higher yields to make them more attractive to investors as a result of the higher risk of the bond not being paid in the future.
Hong Kong shares opened 2.57% lower.