Asian stocks fall after Fitch cuts US credit rating to negative

Asian stocks tumbled and Treasury yields hovered near 20-year highs on Thursday after Fitch Ratings downgraded the United States and policymakers in Washington scrambled to find a deal to avert an unprecedented government default.

Hong Kong’s Hang Seng index fell 2 percent, while Australia’s S&P/ASX 200 fell almost 1 percent, while China’s benchmark CSI 300 index fell 0.5 percent. Japan’s Topix was flat.

The losses in stocks in the region came after credit rating agency Fitch said it had put the U.S.’s triple-A credit rating on negative watch, signaling to investors that a downgrade could be forthcoming.

Fitch last downgraded the United States in October 2013 during the debt ceiling talks in Washington, two days before the annual so-called X-date, when the government is expected to run out of cash.

“We believe there is an increased risk that the debt limit will not be raised or suspended before X-date, and as a result the government will begin to default on certain obligations,” the rating agency said.

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Fitch said his decision “reflects heightened political partisanship that is impeding a resolution to raise or suspend the debt limit despite the rapidly approaching X-date.”

The yield on Treasuries maturing next month — around the time the government is expected to run out of money — eased to 5.67 percent in Asian trade, further down from a peak of 5.88 percent reached earlier this week, but still near its highest level. for more than two decades. Yields on two-year Treasury bills and 10-year bonds were also slightly lower.

The sell-off in Asia followed another weak performance on Wall Street, with the S&P 500 down 0.7 percent and the tech-focused Nasdaq Composite down 0.6 percent as traders grew nervous about the prospect of a U.S. default in June.

But semiconductor stocks reversed the trend and posted outsized gains after U.S. chipmaker Nvidia forecast sales of $11 billion in the three months to the end of July, well ahead of analysts’ expectations on soaring demand for chips used in generative artificial intelligence systems. due to demand.

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Shares in Nvidia jumped 29 percent in aftermarket trading after the announcement, while in Asia Taiwan Semiconductor Manufacturing and South Korea’s SK Hynix rose about 3 percent and 5 percent, respectively.

Futures showed the S&P 500 up 0.4 percent as trading begins on Wall Street for the day, while the FTSE 100 was up 0.3 percent.