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03/08/2023

Today’s Announcements & News

Asia

The Asia-Pacific markets experienced a significant decline on Wednesday following Fitch’s decision to cut the U.S. credit rating from AAA to AA+. This move sparked risk aversion among investors, leading to lower equity prices in the region. Safe-haven assets, such as treasuries, the Japanese yen, and the Swiss franc, saw increased demand compared to riskier currencies like the Australian and New Zealand dollars.

Japan’s Nikkei 225 index led the losses, falling 2.3% and closing at 32,707.69, with utilities and health technology stocks dragging down the market. The broader Topix index also dropped 1.52% to end at 2,301.76.

In Hong Kong, the Hang Seng index slipped 2.27% in its final hour of trading, mainly due to a decline in health-care stocks. Mainland Chinese markets were also in negative territory, with the Shanghai Composite sliding 0.89% to close at 3,261.69, and the Shenzhen Component down 0.35% to end at 11,104.16.

South Korea’s Kospi fell 1.9% to 2,616.47, breaking a four-day winning streak, and the Kosdaq index also dipped 3.18% to 909.76. The country reported an inflation rate of 2.3% for July, the lowest level in 25 months.

Meanwhile, Australia’s S&P/ASX 200 dropped 1.29% to close at 7,354.7 after the Reserve Bank of Australia decided to maintain its benchmark interest rate at 4.1% the previous day.

US

On Wednesday, there was a notable selloff in the stock market, with the Nasdaq Composite experiencing its worst day since February. The downgrade of the U.S. credit rating by Fitch, along with resurfacing risk-off sentiment, contributed to the bearish market.

The Nasdaq Composite, which is heavily composed of technology stocks, fell by 2.17% and closed at 13,973.45. The broader S&P 500 index also retreated by 1.38%, ending the day at 4,513.39. The Dow Jones Industrial Average saw a significant decline of 348.16 points or 0.98%, closing at 35,282.52.

Fitch Ratings downgraded the long-term foreign currency issuer default rating for the U.S. from AAA to AA+ on Tuesday night. The downgrade was attributed to the “expected fiscal deterioration over the next three years.” This marks the first time since 2011 when Standard & Poor’s downgraded the U.S. rating from AAA to AA+. The news of the downgrade and the concerns over fiscal conditions contributed to the negative market sentiment and the selloff in stocks.

Commodity

On Wednesday, oil prices experienced a 2% decline despite a historic drop in U.S. crude stocks. The Energy Information Administration reported that U.S. crude inventories fell by 17 million barrels, which was the largest drop in stocks dating back to 1982. The decrease in crude stocks was attributed to increased refinery runs and robust crude exports. However, traders opted for derisking strategies following the downgrade of the U.S. government’s top credit rating by a major ratings agency, which led to the decline in oil prices.

As for gold, its prices slipped on Wednesday due to the rising U.S. dollar and strengthening bond yields. The dip in gold prices came even after it briefly rose earlier on some safe-haven bids in response to the news of Fitch downgrading the U.S. government’s credit rating from AAA to AA+. The increase in U.S. private payrolls in July, which surpassed expectations, also contributed to the strengthening of the dollar and bond yields, further pressuring gold prices. As a result, spot gold ended the day down 0.54% at $1,933.5649 per ounce.

The above analysis is only for the views of market researchers and is for reference only and is not regarded as a specific investment suggestion.

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