G7 leaders pledge to support financial markets in wake of US debt downgrade; the European Central Bank buys up Spanish and Italian debt; US dollar continues to weaken against other major currencies; China calls for "international supervision" of US dollar and says the country must live within its means; Syrian forces attack Eastern city of Deir al-Zour; efforts to recover US Army helicopter shot down in Afghanistan, killing 38, hampered; and more
Top of the Agenda: World Leaders Respond to U.S. Downgrade
World finance ministers and central bank governors from the G7 pledged Sunday to take "coordinated action" (WSJ) to ensure liquidity and support financial markets, following mounting global economic fears over last week's U.S. debt downgrade and a rising risk of eurozone sovereign debt contagion to Italy and Spain.
After a sharp drop in Asian stock markets on Monday, the G20 issued a similar call out of South Korea, signaling the group would take "all necessary initiatives" (AFP) to ensure global financial stability.
The European Central Bank intervened (FT) in bond markets shortly after, buying up Italian and Spanish debt and pushing yields down sixty-five basis points, as Spanish and Italian stock markets rebounded. However, European stocks resumed a sell-off (Bloomberg), as investors quickly turned back their attention to the economic ramifications of the U.S. downgrade.
The dollar continued to weaken against most major currencies, and U.S. index futures remained down (NYT) ahead of markets opening on Wall Street.
Analysis:
The public's outpouring of disgust over the debt-ceiling quarrel, last week's financial market eruption, and the S&P downgrade could focus people on fixing America's broken political system, writes the Financial Times's Clive Crook.
Jittery investors are influencing fiscal and economic policy more than the national leaders supposedly in charge of rescue efforts, says Deutsche Welle's Bernd Riegert.
Standard & Poor's decision to strip the United States of its triple-A credit rating signals a turning point for the entire global economy, says TIME's Michael Schuman.
PACIFIC RIM: China Lashes Out at U.S. Over Debt
Following Standard and Poor's downgrade of U.S. debt, China's official Xinhua news agency called for "international supervision" (FT) over the issue of U.S. dollars, for the United States to live within its means, and for the country to ensure the safety of China's dollar assets.
U.S. lawmakers' brinkmanship over raising the debt ceiling could have prompted a series of moves--the downgrading of U.S. debt by Standard and Poor's being one--that could cause a selloff of U.S. securities and an end to the primacy of the dollar, writes CFR's Francis Warnock.
Asia: Asian stock markets tumbled Monday, as investors sold off risky assets (WSJ) following the U.S. credit downgrade and rising fears of sovereign debt contagion in Europe.
ELSEWHERE:
- Syrian Forces Attack Eastern City
- Clashes Near Afghan Crash Site
This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.