Wall Street Futures and Dollar Dip After U.S. Credit Rating Downgrade
SYDNEY, May 19 (Reuters) – On Monday, Wall Street futures faced a downturn alongside the U.S. dollar, while Treasury yields climbed following Moody’s decision to downgrade the U.S. credit rating. This development highlighted concerns regarding uncertain U.S. economic policies.
The looming threat of the United States’ $36 trillion debt has raised alarms, particularly as Republicans aim to enact a substantial tax cut package. Some anticipate this could increase national debt by an additional $3 trillion to $5 trillion over the next ten years.
Response from U.S. Officials
U.S. Treasury Secretary Scott Bessent addressed the downgrade in television interviews on Sunday. He dismissed its significance while cautioning international trade partners about severe tariffs if they failed to negotiate in “good faith.” Later this week, Bessent will attend a G7 meeting to engage in further discussions. Additionally, U.S. Vice President JD Vance held a meeting with European Commission President Ursula von der Leyen on Sunday, focusing on trade issues.
Impact of Tariffs and Economic Outlook
According to JPMorgan economist Michael Feroli, whether the 10% reciprocal tariff rate—excluding Canada and Mexico—will remain unchanged or vary for certain countries remains uncertain. He estimates the effective current tariff at approximately 13%, equating to a tax increase worth 1.2% of GDP.
“Beyond disruptions from higher tariffs themselves, policy uncertainty should additionally weigh on growth,” Feroli noted.
With consumer confidence affected by the ongoing trade war, experts closely monitor earnings reports from major retailers like Home Depot for insights into spending trends. Moreover, China’s forthcoming data on April’s retail sales and industrial production, expected on Monday, will provide further clarity on the trade standoff’s impact. Analysts have diverse predictions, anticipating a slowdown in both segments.
Market Movements Overview
MSCI’s index tracking the performance of Asia-Pacific shares, excluding Japan, reflected market ambivalence. S&P 500 futures declined by 0.7%, while Nasdaq futures dropped by 0.8% in early trading—a reaction to President Donald Trump’s recent decision to ease levies on China, following significant rallies last week.
| Market Indicator | Change |
|---|---|
| S&P 500 Futures | -0.7% |
| Nasdaq Futures | -0.8% |
| 10-Year Treasury Yields | +4 bps to 4.48% |
| Dollar to Yen | Down 0.3% to 145.19 |
Despite increased Treasury yields, the dollar continued to slide due to investor unease regarding U.S. trade policy volatility. The euro showed resilience, edging up by 0.2% against the dollar to $1.1188.
European Central Bank President Christine Lagarde, in a weekend interview, remarked that the dollar’s recent decline reflects a diminishing confidence in U.S. policies, which may favor the euro currency.
Commodity Market Trends
Commodities displayed varying trends, with gold rebounding 1.2% to $3,241 an ounce following a near 4% drop last week. Oil prices remained steady amidst concerns of increased production from OPEC and Iran. Brent crude nudged up by 6 cents to $65.47 per barrel, while U.S. crude gained 15 cents to reach $62.64 per barrel.
