U.S. Crisis Will Exacerbate Europe - The decision of international rating agencies , Standard & Poor's (S & P) downgraded the United States debt rating from AAA to AA (Read: Debt rating Agencies not Fair) is expected not only cause concern on the U.S. economy, but will make a setback in efforts to save Europe from the debt crisis.
"There are two things that are ongoing at this time. The debt crisis of Europe is actually more acute and risky than the decrease in S & P rating debt. If we talk about the bond market, these issues seem to be overlapped and connected with each other," says Chief Strategist CRT Capital as quoted from cnbc.com page, Monday, August 8, 2011.
Global financial institutions appear to be working full time for the weekend to prepare directives on market opening in order to overcome the impact of the U.S. debt.
In Europe, the European Central Bank (ECB) have said that they will activate the security program of capital markets and anticipate economic reformation and deficit-cutting performed by the Italian and Spanish. There is a signal showing that the ECB will buy the debt of Spain and Italy in order to stabilize market conditions.
At the same time, a number of finance ministers from the G-7 have also issued a statement of their support for the ECB's action in solving problems of two European countries that threatened deficit. This group of rich countries is also welcomed steps taken by the U.S. to adopt reformation and efforts to reduce the deficit in the medium term.
Besides Europe, the financial firms on Wall Street, the U.S. also forced to work overtime at the weekend by opening a telephone connection for a number of their investors. Some of them predicted would be the weakening U.S. dollar exchange rate. But for the financial markets is not expected to be less affected.
From Brown Brothers Harriman, Chandler said, investors seemed more focused on the U.S. central bank plan (the Fed) which is scheduled to hold a regular meeting on Tuesday. "The Fed seems to be more friendly (lower interest rates)," he said.
He added that one thing that can be taken of the Fed is put on interest rates stay low for a long time. The Fed also plans to discuss the purchase of assets. "They mostly buy short-term investments," he said.
