Global markets continue to have a negative reaction to Friday's first-ever downgrade of the U.S. credit rating by the Standard & Poors rating agency.
Major indexes across Asia were down between 2 percent and 4 percent in midday trading Monday, with shares in South Korea tumbling by 7 percent at one point. Stock futures in New York were also lower ahead of the market opening on Wall Street.
Middle East markets closed down sharply Sunday, including a 7 percent plunge for the Tel Aviv stock exchange.
U.S. Treasury Secretary Timothy Geithner says the S&P used “terrible judgment” when it downgraded the U.S. credit rating last week from the top triple-A grade. Geithner says the S&P showed a “stunning lack of knowledge” about the mathematics used to draw up a federal budget.
The downgrade signals that the S&P believes U.S. government bonds are now a riskier investment. S&P Managing Director John Chambers predicts another possible downgrade as soon as six months from now.
But Geithner said the United States has a very resilient and strong economy. He said U.S. treasuries are an absolute safe investment and that there is no risk of the United States not being able to meet its obligations.
The other two major credit rating agencies – Moody's and Fitch – have so far kept the U.S. triple-A rating.
S&P defended its decision to drop the credit rating. It blamed Congress for months of political haggling over a deficit reduction deal that S&P says does not go far enough. The deal calls for cutting the deficit by more than $2 trillion over 10 years. S&P called for $4 trillion in savings.
Geithner said Sunday he will not resign. He was considering leaving the job when the debt ceiling debate in Congress ended. A White House spokesman said President Obama is pleased that Geithner will remain at his post.
Republican Senator Rand Paul and Congresswoman Michelle Bachmann – a Republican presidential candidate – have both publicly demanded that Geithner quit, holding him and the Obama administration responsible for the lowered credit rating.
