That’s more like it, exclaim the bulls. A batch of strong US earnings reports has revived investors’ hopes that the global economic climate remains conducive to improving corporate performance, boosting risk appetite after the brief wobble delivered by S&P’s warning on US debt.
The FTSE All-World equity index is up 1.1 per cent, commodities and “growth” currencies are rallying, while perceived havens such as the yen and core bonds are under pressure.
As the president addressed a domestic audience to sell his deficit plan, Tim Geithner, US Treasury secretary, made three appearances on financial television programmes to talk up the creditworthiness of the US.
Mr Geithner said there was “no risk” that the US’s triple A credit rating would be downgraded, in contrast to S&P’s assessment in a note on Monday that implied a one-in-three chance of a downgrade as it switched the outlook for the country’s debt from “stable” to “negative”.
“I think if you listen carefully, the prospects of [a deal] are better today than they’ve been in a long period of time, because people are saying that this is important to do for the economy and we have to start now,” he said.
Mr Geithner’s message was buoyed by Tokyo’s reaction to the S&P move, with a senior official in Japan – the second largest foreign holder of US sovereign debt – saying Treasuries remained “attractive”.
The Chinese government, the top foreign holder of US debt, said: “We hope the US government will take responsible policies and measures to safeguard investors’ interests.”
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