MAJOR stock markets mostly slid further yesterday as traders moved out of riskier assets after Fitch stripped the United States of its top credit rating this week.

All three major US indices ended lower, with the broad-based S&P 500 down 0.3% while investors awaited Apple and Amazon’s earnings reports after the closing bell.

Amazon profits beat market expectations and its shares surged 7.7% in after hours trading, while Apple profits edged higher as well.

Europe’s main equity indices ended the day lower, with London’s blue-chip FTSE 100 index down 0.4%. This came after the Bank of England hiked its key interest rate for a 14th time in a row, by a quarter-point, to 5.25% as UK inflation stays high.

Asian indices also tumbled for a second day running following a slide Wednesday on Wall Street.

“Global markets extended yesterday’s declines as investors digested the prospect that US government debt is now considered lower quality following Fitch’s downgrade,” noted Laith Khalaf, head of investment analysis at AJ Bell.

“The decision by the credit agency to cut the rating led to higher US government bond yields which in turn has a negative impact on equities,” he said.

Fitch’s decision Tuesday to downgrade the United States to AA+ from AAA sparked a fiery rebuttal from Washington, and was met with bewilderment by many analysts and economists.

Stock markets have rallied in recent months on hopes that the US economy would have a “soft landing” where inflation falls without triggering a major recession on the back of Federal Reserve rate hikes.

While data released yesterday on unemployment, labour productivity and costs were in line with the US economy dodging a downturn, it failed to boost stocks. 

Briefing.com analyst Patrick O’Hare said there is a “nagging notion that the stock market is due for a pullback after its big run, which is perhaps the key sentiment overhang at the moment.”

Rather than a push to sell, there has been a falloff in buying interest in equities, he added.

Across the Atlantic, the BOE’s rate hike was widely expected and had little impact on trading in the pound, while the FTSE 100 pared losses after the announcement. 

Analysts are beginning to see the possibility that the BOE may not hike rates much further if at all, much like expectations that the US Fed and the European Central Bank are also close to “peak” rates.

With two inflation reports due before the BOE’s next rate-setting meeting, “there is a chance that today’s hike could well have been the final one of this cycle,” said Michael Hewson at CMC Markets. 

Oil prices rose after Saudi Arabia extended its voluntary oil production cut of one million barrels per day for another month, maintaining its campaign to prop up prices.

Today, all eyes will be on US payroll figures for their potential bearing on the Fed’s next rate decision.

Key figures around 2030 GMT

New York - Dow: DOWN 0.2% at 35,215.89 (close)

New York - S&P 500: DOWN 0.3% at 4,501.89 (close)

New York - Nasdaq: DOWN 0.1% at 13,959.72 (close)

London - FTSE 100: DOWN 0.4% at 7,529.16 (close)

Frankfurt - DAX: DOWN 0.8% at 15,893.38 (close)

Paris - CAC 40: DOWN 0.7% at 7,260.53 (close)

EURO STOXX 50: DOWN 0.7% at 4,304.63 (close)

Tokyo - Nikkei 225: DOWN 1.7% at 32,159.28 (close)   

Hong Kong - Hang Seng Index: DOWN 0.5% at 19,420.87 (close)

Shanghai - Composite: UP 0.6% at 3,280.46 (close)

Euro/dollar: UP at US$1.0952 from US$1.0940 on Wednesday

Pound/dollar: DOWN at US$1.2710 from US$1.2711 

Euro/pound: UP at 86.14 from 86.04 pence 

Dollar/yen: DOWN at  ¥142.52 from  ¥143.37

West Texas Intermediate: UP 2.6% at US$81.55 per barrel

Brent North Sea crude: UP 2.3% at US$85.14 per barrel – AFP, August 4, 2023.