19th May 2025 06:52
(Alliance News) - Stocks in London are set to open lower at the start of the week, with a US credit rating downgrade weighing on sentiment.
IG says futures indicate the FTSE 100 to open 28.3 points lower, 0.3% at 8,656.26 on Monday. The index of London large-caps rose 50.81 points, 0.6%, at 8,684.56 on Friday.
The pound rose to USD1.3298 on Monday, from USD1.3260 at the time of the London equities close on Friday. The euro climbed to USD1.1182 from USD1.1146. Against the yen, the dollar faded to JPY145.21 from JPY145.97.
Gold climbed to USD3,219.70 an ounce amid the weaker dollar, from USD3,181.86. A barrel of Brent fetched USD65.02, down from USD65.16.
Moody's Ratings on Friday downgraded the US long-term issuer and senior unsecured ratings to Aa1 from Aaa and changed the outlook to stable from negative.
The one-notch downgrade on the 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns, the credit rating agency said.
Moody's said successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.
"We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration. Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat. In turn, persistent, large fiscal deficits will drive the government's debt and interest burden higher. The US' fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns," it said.
Moody's said the stable outlook reflects balanced risks at Aa1.
The yield on the US 10-year Treasury was quoted at 4.50%, stretching from 4.44% at the time of the London equities close Friday. The yield on the US 30-year Treasury widened to 4.99% from 4.89%.
Swissquote analyst Ipek Ozkardeskaya commented: "The week starts with a jump in US yields and a weaker dollar after Moody's downgraded the US credit rating from the top Aaa to Aa1.
"This means that the market optimism seen just a week ago — following an agreement between the US and China to talk while lowering tariffs during a 90-day window — could be derailed at any moment. The realization that such optimism may be premature should trigger a return to safe-haven assets, including gold (which had retreated over the past two weeks), the Swiss franc, and the Japanese yen. The euro could also see inflows, along with European sovereign bonds."
In New York on Friday, before the Moody's release, the Dow Jones Industrial Average added 0.8%, the S&P 500 rose 0.7% and the Nasdaq Composite added 0.5%.
In Tokyo, the Nikkei 225 was down 0.8%, while Sydney's S&P/ASX 200 fell 0.7%. The Shanghai Composite in China was flat. The Hang Seng Index was 0.3% lower.
UK Prime Minister Keir Starmer's bid to secure a new deal with the EU has gone "down to the wire" with talks continuing overnight ahead of a major summit with the bloc.
Ministers had appeared confident of securing an agreement, with Number 10 saying on Saturday the prime minister would "strike a deal" at the first UK-EU summit on Monday.
But government sources said late on Sunday: "Negotiations are going down to the wire and a deal is not yet done.
"There are some outstanding issues on both sides and conversations will continue overnight."
Monday's economic calendar has eurozone inflation data at 1000 BST.
By Eric Cunha, Alliance News news editor
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