The FTSE 100 fell with global equities on Monday after Moody’s cut the US credit rating to Aaa to Aa1, hitting investor sentiment and stopping a rip-roaring rally in global equities in its tracks.
Despite the downgrade having little real-world impact, with most other credit rating agencies already stripping the US of its ‘triple A’ ratings, the move has served as a reminder of the risks facing the global economy from Trump’s trade policies.
London’s leading index fell in early trade and was down 0.6%. US futures were pointing to a lower open, while most major European indices traded in negative territory.
News of an agreement between the UK and the EU to reduce trade frictions did little to boost interest in stocks on Monday.
“While largely a symbolic move, the US credit downgrade from Moody’s, as well as the progress of a bill in Washington promising major tax cuts, cast a pall over the markets at the start of the week,” says AJ Bell investment director Russ Mould.
“Having been floored by the announcement of Liberation Day tariffs last month, stocks got back on their feet remarkably quickly, but there is still enough to suggest some lasting grogginess.
“US-related stocks and investment trusts dominated the list of losers on Monday morning in London, while precious metals miners were higher as gold and silver prices moved up and the dollar weakened.”
Pershing Square Holdings, the US equity-focused FTSE 100 closed-ended fund, was the top faller following the US downgrade. Pershing Square’s top holdings include Alphabet, Chipotle, Nike and Uber.
The Scottish Mortgage Investment Trust, a vehicle heavily weighted towards US tech, was not far behind Pershing Square at the bottom of the leaderboard.
Fresnillo was the FTSE 100 top riser with a 1.7% gain. Gold miner Endeavour Mining only added 0.3%.
Diageo shares slipped despite sales increasing in its fiscal third quarter as the group announced the impact of tariffs on the business.
“The current tariff regime is expected to cost around $150mn annually,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“Diageo expects to be able to offset around half of this through streamlining operations and will likely lean on price hikes to help offset the rest. But this will take a bit of time to enact. Alongside a soft first-half performance, full-year organic operating profits are expected to decline slightly.”