Global shares slip, echoing Wall Street’s retreat from its rally

A currency trader gestures in front of the screens showing the Korea Composite Stock Price Index (KOSPI), top right, at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Wednesday, Aug. 2, 2023.  (AP Photo/Ahn Young-joon)

TOKYO  — Global shares dipped Wednesday after Wall Street took a step back from its big rally as markets tried to digest a slew of earnings.

France’s CAC 40 fell 1.3 percent to 7,311.42 in early trading, while Germany’s DAX dipped 1.4 percent to 16,007.22. Britain’s FTSE 100 dropped 1.8 percent to 7,531.78. U.S. shares were set to drift lower with Dow futures down 0.7 percent at 35,507.00. S&P 500 futures lost 0.9 percent to 4,558.25.

Investor optimism was hurt by Fitch Ratings downgrading the United States government’s credit rating, citing rising debt at the federal, state, and local levels. The rating was cut Tuesday one notch to AA+ from AAA, the highest possible rating. In 2011, the ratings agency Standard & Poor’s stripped the U.S. of its prize AAA rating.

READ: Fitch cuts US credit rating to AA+; Treasury calls it ‘arbitrary’

Treasury Secretary Janet Yellen said the move by Fitch was based on outdated data, noting the U.S. economy has rapidly recovered from the pandemic recession.

“Some negativity was permeating across Asian equity markets mid-week thanks to Fitch downgrade news. Whilst not a game-changer, news that Fitch downgraded the U.S. credit rating by a notch was enough to put risk appetite on the back foot, as evidenced by the red numbers across the board,” said Tim Waterer, chief market analyst at KCM Trade.

Japan’s benchmark Nikkei 225 dove 2.3 percent to finish at 32,707.69. Australia’s S&P/ASX 200 fell 1.3 percent to 7,354.60. South Korea’s Kospi slid 1.9 percent to 2,616.47. Hong Kong’s Hang Seng dipped 2.5 percent to 19,517.38, while the Shanghai Composite lost 0.9 percent to 3,261.69.

While inflation has come down since the summer and the U.S. economy has remained remarkably resilient, critics say it’s no guarantee inflation will continue to cool at the same rate.

READ: US economic growth accelerates in 2nd quarter, weekly jobless claims fall

Amazon and Apple are scheduled to report earnings on Thursday, and because they’re two of the biggest stocks by market value, their movements pack more punch on the S&P 500 than other companies. Both have soared this year, along with other Big Tech stocks.

In energy trading, benchmark U.S. crude rose 34 cents to $81.71 a barrel. Brent crude, the international standard, gained 33 cents, to $85.24 a barrel.

In currency trading, the U.S. dollar edged down to 142.50 Japanese yen from 142.83 yen. The euro cost $1.0989, up from $1.0982.