The Big Picture (putting it all together)

[Trinityz1]

The mighty empire begins to crumble..

"Analysts said S&P's warning had taken the markets by surprise.".. Proving once again that "anal-ysts" have their heads up their "anals"..

later..


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BBC World News
18 April 2011 Last updated at 12:07 ET
US credit rating warning prompts global markets fall

Shares on major markets have dropped sharply after a ratings agency warned it could downgrade US government debt.

The leading indexes in the US and around Europe were all down by around 2% following the announcement.

The Dow Jones recovered to a loss of 1.62% at 12,141 points, with London's FTSE 100 index down 2.1% at 5,870.

Standard & Poor's (S&P) is concerned that Democrats and Republicans will not be able to agree a plan to reduce the growing US deficit.

The agency has downgraded its outlook from stable to negative, increasing the likelihood that the rating could be cut within the next two years.

The US Treasury responded that S&P had underestimated its ability to tackle the national debt.

In Europe, the main UK, German and French indexes all fell by at least 2%. Shares in Milan plunged more than 3%.
Analysts said S&P's warning had taken the markets by surprise.

Kathleen Brooks, research director at Forex, said the downgrade was a "shocker" which could affect investors' appetite for US government bonds.

She said: "The US may be in the last throes of being a safe haven, and the notion of the Treasury being a risk-free asset may die a slow death from here."

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: "It also comes as a timely reminder that although focus has tended of late to centre on peripheral Europe, opposing political forces in the US need to unite and tackle an increasingly difficult deficit situation."

The move sparked a rally in gold, seen by some as a secure investment, which closed at a new high of $1,493 an ounce compared with $1,476.75 previously.

The dollar continued to rise against the euro, which had been weakening during the day due to heightened concerns about the eurozone debt crisis. The dollar was 1.5% up at 0.7035 euros.

The US federal deficit currently stands at $1.4tn (£858bn) and is expected to reach $1.5tn in the current fiscal year.

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