Global shares fall as investors digest downgrading of US credit rating

Global shares fell on Wednesday as investors digested an unexpected downgrade of the United States’ top-tier sovereign credit rating by ratings agency Fitch on Tuesday.

Fitch downgraded its US debt rating citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.

Dublin

Euronext Dublin finished down less than one per cent on Wednesday, as several heavy hitters on the Iseq Index published strong performance updates.

Kerry Group shares rose by 2.41 per cent as the food company reported first-half adjusted earnings that beat estimates. Revenues at Kerry Group rose slightly in the first six months of the year to €4.12 billion, and analysts noted growth prospects for the company’s taste and nutrition business.

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Permanent TSB Group Holdings shares fell by 3.46 per cent on Wednesday, but remain up almost 60 per cent on a 12-month basis, as the bank raised its guidance for 2023 on the back of higher interest rates. PTSB raised its underlying pretax profit forecast by 13 per cent to €180 million, as the new projection compares with a figure of €45 million reported last year.

Smurfit Kappa shares were up 1.17 per cent as the group signalled confidence in its prospects by increasing interim dividends by 6 per cent. This was despite sales falling 9 per cent in the first half of the year, as demand for cardboard boxes fell back from the highs of the pandemic.

Dublin-listed renewable energy storage developer Corre Energy BV was up 6.33 per cent at close on Wednesday, while Paddy Power Betfair parent Flutter Entertainment was down 3.31 per cent at close of business.

London

The UK’s FTSE 100 fell more than 1 per cent on Wednesday, impacted by global risk sentiments in the wake of ratings agency Fitch cutting US credit ratings.

The blue-chip FTSE 100 index dipped 1.4 per cent, touching its lowest level since 19th July, while the more domestically focused FTSE 250 midcap index shed 1.3 per cent.

The aerospace and defence sector gained 2.3 per cent, touching a record high as BAE Systems added 5.6 per cent. Britain’s biggest defence company upgraded its guidance for 2023, forecasting annual earnings per share would grow 10-12 per cent.

Industrial metal miners slipped 2.5 per cent as prices of most base metals fell. Endeavour Mining tumbled 7.3 per cent after reporting second-quarter results, and the broader precious metal mining index slipped 5.1 per cent.

Among individual stocks, London-listed shares of Smurfit Kappa fell 1.5 per cent, Convatec Group rose 2.8 per cent, Taylor Wimpey gained 2.8 per cent higher, while Haleon slipped 2.2 per cent.

Europe

The pan-European Stoxx 600 index was down 1.35 per cent on Wednesday, while earlier in the day it had dropped as much as 1.8 per cent, slumping the most in almost a month after Fitch’s ratings downgrade, while earnings reports did little to offset the negative sentiment.

The German Dax pulled back from record highs on Tuesday after weak factory activity data from across the globe raised concerns of an economic slowdown.

US

Wall Street fell on Wednesday after Fitch’s move to downgrade the US government’s credit rating to AA+ from AAA, citing fiscal deterioration.

This is the second big agency to cut the country’s rating. Standard & Poor’s stripped the US of its triple A rating in 2011 after the global financial crisis. However, several big brokerages said Fitch’s downgrade was unlikely to result in a sustained drag on US financial markets.

The S&P 500 fell more than 1 per cent and was set for its biggest decline since May, while the Nasdaq 100 dropped almost twice as much.

Ten-year yields hit the highest since November as the Treasury said it will sell $103 billion (€94 billion) of longer-term securities at its quarterly refunding auctions next week.