Decline of Asian Stocks as Won, Kiwi Drop on U.S. rating Outlook

April 18, 2011, 11: 15 am EDT by Shiyin Chen and Anna Kitanaka

April 19 (Bloomberg)--Asian stocks fell, sending the benchmark in the region to its largest loss in five weeks, while the South Korea won and the New Zealand dollar has led to a decline of higher yield currencies after Standard & Poor's credit Outlook cut on the United States to negative.

The MSCI Asia Pacific Index dragged 1.4 percent to 133.77 11: 45 am in Tokyo. Future on the S & P 500 Index dropped by 0.5%. The won weakened from 0.5% to 1,093.30 every dollar, while the so-called kiwi dropped by 0.6% to 78.61 U.S. cents. The yen climbed against the 16 most actively traded counterparts. Japanese Government bond futures rose for a fifth day, then that recovered copper a drop of six days.Japanese exporters led to losses, extending to a global slump in stock markets, after S & P to the Government of the United States notice that it risks losing its AAA credit rating, unless decision makers to agree on a plan in 2013 to reduce budget deficits and national debt. "In Europe, an economic report today can display manufacturing slowed growth, as concern that the worsening of the debt crisis the region sent Greek and Portuguese bond yields surging.""If we get to a point where the United States has its debt downgraded, the deflationary effects will be felt in the world," said Tim Schroeders, that allows to manage about 1 billion dollars to Pengana Capital Ltd. in Melbourne. "A lot of credit is a price excluding U.S. denominated debt and these effects will be felt around the world."Approximately eight shares fell to everyone who has acquired Asia Pacific Index of MSCI, which has been set for its steepest loss since March 15. Nikkei 225 Stock average of the Japan fell 1.5%, with Toyota Motor Corp. in decline of 2.8%.Chip EarningsInpex Corp. fell by 2.2 per cent while BHP Billiton Ltd. sank at 1.8% after a decline in prices yesterday. Newcrest Mining Ltd. slipped 1.3% after the largest gold mines in the Australia company reduce its production for a second time.LG Display Co. jumped 5.1 per cent after the second - largest manufacturer of flat world reported a loss that is smaller than analysts estimates. Advantest Corp. and Elpida Memory Inc. has decreased more than 4.3% each, stimulation of losses among connected after the computer chip companies as Texas Instruments Inc. forecast revenue in the second quarter and profit which did not estimates of some analysts.Texas Instruments has decreased in trade extended after the largest manufacturer of analog-chip forecast of profit in the current quarter will be 52 cents to 60 cents a share on sales of 3.41 to 3.69 billion. Which is comparable to the estimate of the average analyst 63 cents to profit on 3.53 billion in sales, a Bloomberg survey. Goldman Sachs Group Inc. and Johnson & Johnson are among the companies expected to release quarterly results today.U.S. OutlookThe S & P 500 dropped 1.1% yesterday, its steepest since March 16 loss, as S & P, has said there is a chance of one in three U.S. rating could be cut in two years and that his "basic premise" is that Congress and the administration of Obama will come to terms on a plan to reduce Records.Rendements deficits over 10 years treasuries were little changed at 3.37% after having declined yesterday the three basis points. Noda of Yoshihiko for the Minister of Finance of the said Japan U.S. debt continues to be an "attractive investment", and economic and fiscal policy Minister Kaoru Yosano said that Treasury would still "titles of very good quality" even if the rank was lowered.Performance of 10 years to the point of reference of the Japan fell to a point of basic-1.235%, while the future of the obligation of 10 years for June delivery gained 0.17 to 139.53 on the Tokyo Stock Exchangewhich extends from their series of victories in the longest eight months. "Fearing" market "really sums up how much time the market may remain fearful on Europe and the United States," said Adam Carr, a senior economist in Sydney in Australia Ltd., a unit of brokers broker ICAP largest in the world. "" " Risk aversion generally assumes a repatriation of funds into yen. "The Philippine peso dragged 0.3 per cent to 43.355 by dollar and Taiwan dollar weakened from 0.2% to NT$ 29.156. The Australian dollar declined from $1.0485 of $1.0509 yesterday.The yen traded at 82.54 82.66 dollar in New York yesterday, when he moved to 82.19, the highest since March 29. Currency of the Japan was a euro 117.66 117.33. The dollar bought $1.4215 a 1.4235.The euro $ purchase index of managers for the manufacture of the Euroregion dropped to 57.0 in April of 57.5 in March, according to the median estimate of economists in a survey of Bloomberg News before data due today. Readings above 50 indicate expansion.Greek CrisisYields over two years the Greek notes climbed above 20 percent yesterday and swaps of credit - default signal a chance to 64.5% of default within five years, while the representatives of the nation, said the restructuring is not being discussed. Portuguese yields two and 10 years also reached the euro-ère records.Gold for immediate delivery traded at $1,491.30 an ounce. Bullion reached a record level of $1,497.90 yesterday. Copper for the delivery of three month won 0.6% to $9,279 per metric tonne on the London Metal Exchange, halting a slump of 6.6 per cent of six days. Wheat gained 0.6% to $8.1550 a bushel, which extends from the wave of 3.9% yesterday, as conditions of winter crops, to the United States the largest exporter, has deteriorated.Oil for may delivery slipped 0.4% to $106.75 US per barrel on the New York Mercantile Exchange, after the fall of 2.3% of yesterday.

-With the help of Candice Zachariahs Sydney, Yoshiaki Nohara in Tokyo and Masaki Kondo, Ron Harui and Wes Goodman at Singapore. Editor: James Poole

To contact the reporters on this story: Shiyin Chen at Singapore at schen37@bloomberg.net. Anna Kitanaka in Tokyo, at akitanaka@bloomberg.net.

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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Fall of Asian Stocks as U.S. credit Outlook cut; Oil price drop

April 18, 2011, 10: 49 am EDT by Anna Kitanaka

April 19 (Bloomberg)--Asian stocks fell, leading the benchmark index to its largest decline since March 15, after that Standard & Poor ratings Service cut the long-term prospects of credit U.S., fueling concern that a recovery in the global economy could slow.

Toyota Motor Corp., Builder of no. 1 in the world, fell by 2.8% in Tokyo. BHP Billiton Ltd., more important of the Australia oil producer, fell by 1.8 per cent after oil and metals prices declined. Samsung Electronics Co. lost 0.9% in Seoul after Apple Inc. filed a lawsuit alleging infringement of trade mark. Advantest Corp., the second manufacturer of semiconductor test equipment, collapsed 4.3% in Tokyo after Texas Instruments Inc. forecasts of revenue and profits which did not estimates of some analysts.The MSCI Asia Pacific Index fell 1.4 percent to 133.75 at 11: 41 am in Tokyo, with approximately eight shares for each abandonment which climbed on the gauge 1 023-member. The measure fell 0.5% last week, reversing three consecutive weeks of gains. "" If we get to a point where the United States has its debt downgraded, the deflationary effects will be felt in the world, "said based in Melbourne Tim Schroeders, of Pengana Capital Ltd., which manages approximately $ 1 billion. "A lot of credit is a price excluding U.S. denominated debt and these effects will be felt around the world."Nikkei 225 Stock average of the Japan fell by 1.5%. S & P/ASX 200 Index the Australia collapsed 1.3% and index of 50 of NZX lost New Zealand 0.7%. Index of the Korea of southern ABN slipped 1 percent.Hong Kong Hang Seng index fell 1.3% while Shanghai Stock Exchange index Composite China fell by 1.4%.U.S. FuturesFutures on Standard & Poor of 500 index fell 0.5% today. In New York yesterday, the S & P 500 lost 1.1%, the largest decline since March, after S & P lowered its Outlook on U.S. credit outlook to "negative".Toyota, which account in North America as its largest market, fell 2.8 percent to 3,135 yen, the biggest drag on the MSCI index of Asia Pacific. Canon Inc., manufacturer of camera more, sank from 1.9% to 3,550 yen. In Sydney, James Hardie Industries SE, the largest seller of siding home in the United States, decreased 2 percent to a risk of Government 5.88.The U.S. $ losing its AAA credit rating, unless decision makers to agree on a plan in 2013 to reduce budget deficits and national debtthe rating agency said. "Medium term" concerns & P has said there is a chance of one to three that the rating may be cut in two years and that its "basic assumption" is that the Congress and the administration of Obama will come to terms on a record deficit-reduction plan. " "It is clearly a concern about how the United States manages the debt in the medium term," said Schroeders.BHP decreased by 1.8% to $46.655, the second most large drag on the MSCI index of Asia Pacific. " Rio Tinto Group, society of second mining of the world by sales, fell by 2.2 per cent for a $82.15. Inpex Corp., of Japan more great oil and gas Explorer, dropped 2.2 percent to 585 000 yen.For may delivery slipped 2.3% to $107.38 per barrel in New York, close to a minimum of three days after China, second more large consuming nation in the world crude, increased Bank reserve requirements to cool inflationdemand of fuel traffic growth may slow down of crude oil. The London Metal Exchange Index six metals collapsed 1.9% yesterday, the lowest since March 16 the MSCI Asia Pacific Index lost 1.5 percent this year through yesterday, compared to earnings of 3.8%, the S & P 500 and 1 per cent by the Stoxx 600 Index of Europe. In the Asian benchmark stocks are valued at 13 times estimated in average earnings, compared to 13.4 times for the & S P 500 and 10.9 times for Stoxx 600.

-With the help of Norie Kuboyama in Tokyo. Editor: Nick Gentle.

To contact the reporter on this story: Anna Kitanaka in Tokyo, at akitanaka@bloomberg.net.

To contact the responsible editor of the story: Nick Gentle at ngentle2@bloomberg.net

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Republicans, Democrats digging on the debt after S & P Outlook Cut

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April 18, 2011, 6: 07 PM EDT By Julie Hirschfeld Davis

(Updates with comments from Warner in 14th paragraph, Corker in 17, 18th paragraphs.)

April 18 (Bloomberg) — Republicans and Democrats in Congress, divided over dealing with the nation's debt, used today's decision by Standard & Poor's to lower the U.S. credit outlook to "negative" to bolster their competing arguments about addressing the government's finances.Democrats argued the S & P's revision helps make the case for a broad agreement based on the debt-cutting plan President Barack Obama outlined last week. Republicans said the ratings firm's report reinforces their call for deeper spending cuts than the president and other Democrats have been willing to consider."Charles Schumer of New York, the Senate's third-ranking Democrat, said bipartisan agreement exists on the need to reduce the debt by $4 trillion over roughly the next decade.""now we just need to resolve how to do it," Schumer, who is traveling in Asia during a two-week congressional break, said in a statement. Obama's "balanced plan - which related on shared sacrifice, as opposed to simply ending Medicare - makes a long-term deal highly possible," the senator said.Republicans have proposed scaling back entitlement programs such as Medicare and reject Obama's push for tax increases to help reduce debt.'Wake-up Call'House Majority Leader Eric Cantor, a Virginia Republican, called the S & P warning "a wake-up call for those in Washington asking Congress to increase the debt limit blindly" without significant spending cuts.The negative outlook on long-term U.S. debt issued by S & P "makes clear that the debt-limit increase proposed by the Obama administration must be accompanied by meaningful tax reforms that immediately reduce federal spending and stop our nation from digging itself further into debt""," Cantor said.Congress is facing a vote as early as next month on the government's raising $14.29 trillion legal debt limit. The Treasury Department projects that it will hit the cap on May 16, though it could use emergency measures to avoid default until about July 8.Obama and members of his economic team have said that failure to approve an increase could have catastrophic consequences for the U.S. economy and financial markets.S & P's ConcernS & P revised the U.S. government's long-term outlook to negative on concern the White House and Congress will fail to reach agreement on cutting medium-and long-term debt.As part of the debate on the government's spending, which also includes hammering out a 2012 budget, Obama last week offered the outlines of a plan to slash the debt by $4 trillion over 12 years through a combination of spending cuts and tax increases.A group of six Republican and Democratic senators are trying to strike a compromise along the lines suggested by the two co-chairmen of a debt commission Obama set up last year. That plan called for trimming the budget by $3.8 trillion over a decade through a mix of spending cuts and tax increases."Members of the so-called Gang of Six said the S & P review shows the markets are watching for signs that policy makers are serious about confronting the issue debt.""I still believe we must act sooner rather than later, and we should work in a bipartisan way to cut spending, including defense spending, begin to strengthen and reform entitlement programs and implement tax reform," senator Mark warner of virginia, the democratic leader of the groupsaid in a statement. ' If we fail to take this seriously, and if our deficit and debt discussions turn into just another game of political brinksmanship, this could result in the most predictable economic crisis in our history. "'"Debt Crisis 'Senator Tom Coburn of Oklahoma, a Republican member of the group, said the S & P's change should create a sense of urgency for tackling"our debt crisis."""If we refuse to negotiate within our own government, we will soon find ourselves negotiating with foreign governments and the international financial community on terms far less favourable than we enjoy today," Coburn said in an e-mailed statement.Republican Senator Bob Corker of Tennessee said a proposal he is pushing to cap federal spending at 20.6 percent of gross domestic product within a decade should be a condition of any debt-limit increase, and that the S & P action increases the momentum for the move.Good Timing "I don't think any American likes seeing the outlook for our country's financial situation downgrade, but it couldn't come at a better time, if it had to happen, than now, when we're negotiating about how to get spending under control""," Corker said in an interview.Senator Lamar Alexander of Tennessee, the Senate's third-ranking Republican, said the S & P's revision reminds the president and Congress that "we must deal with Washington spending money that we don't have."Speaking in his home state, he said, "We can fix it, but we have to start now and have the political will to do it."Republican Representative Kevin Brady of Texas, vice chairman of Congress's Joint Economic Committee, said the move builds the case for a plan by Republican House Budget Committee Chairman Paul Ryan of Wisconsin. His proposal would slash spending by $6 trillion over a decade, in part by privatizing Medicare and capping Medicaid.Obama "needs to stop ridiculing Representative Ryan's plan, which begins to seriously address our country's long-term spending issues, and start supporting it as the best way forward""," Brady said.Dwindling ConfidenceRepresentative Jeb Hensarling of Texas, head of the House Republican Conference, said confidence in the U.S. economy is "sure to dwindle" when Obama "chooses to treat our national debt as campaign fodder and insists on more spending and more taxes."House Democratic Whip Steny Hoyer of Maryland said the S & P's decision "shows the urgent, bipartisan action needed to put our nation on a serious path to reduce deficits." It "demonstrates that Republicans cannot hold the debt limit hostage over partisan, divisive issues," he said.The revision is a "market-based signal that independent ratings agencies believe the U.S. is on an imprudent and unsustainable fiscal path and that action is needed in order to maintain investor confidence," said David Walker, a former U.S. comptroller general who heads the Comeback America Initiative, an independent, non-profit tax policy organization.Walker said in a statement that Obama and Congress must "work together to raise the debt ceiling limit and imposes tough statutory budget controls, including debt/GDP targets with automatic enforcement mechanisms that would take effect no later than fiscal 2014."

-With assistance from James Rowley and Brian Faler. Editors: Don Frederick, Laurie Asseo.

To contact the reporter on this story: Julie Hirschfeld Davis in Washington at Jdavis159@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva@bloomberg.net

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Collapse of American Stocks such as S & P cuts Outlook of the Nation's long-term credit

April 18, 2011, 4: 45 pm EDT by Rita Nazareth and Inyoung Hwang

April 18 (Bloomberg) - U.S. stocks collapsed, sending benchmark index for their biggest decline in a month, after the break of Service rating Standard & Poor nation long-term credit outlook to negative.

Caterpillar Inc. and United Technologies Corp. sank less than 2.1% to help pace the declines in the Dow Jones index. Morgan Stanley cyclical index fell 1.2% as its stocks of 30 dropped 26. Exxon Mobil Corp. and Chevron fell more than 1.4 per cent in the efforts that China cool inflation will hurt the economy of concern.S & P 500 decreased by 1.1% to 1,305.14 to 4 hours, in New York, its largest decline since March 16. The Dow average has 140.24 points, or 1.1%, to 12,201.59. "" There are many structural problems must be addressed, ", said Mike Ryan, strategist investment Chief based in New York for Wealth Management Americas at UBS Financial Services Inc., which oversees $ 741 billion. "Whenever you see anything which suggests that the rating may be subject to downgrade, it is perceived negatively." If this should increase the cost of funding for the Government, it could weigh on the economy. It is clearly not positive for business. "The & S P 500 had rallied to 4.9% this year through April 15 in the Middle higher than the estimated profits of enterprises and Government stimulus measures. Fed agencies and some United States were loaned, spent or guaranteed approximately $ 8.2 billion, to lift the economy from the worst recession since the great depression, according to data compiled by Bloomberg. "The negative & P put a"negative"outlook on the United States AAA credit rating, assigning a chance of one to three of a rating cut over the next two years, rising budget deficits and debt. "We believe, there is a significant risk that U.S. policy makers could not reach an agreement on how to address the medium - and long-term in 2013 budgetary challenges," New York-based S & P said in a report today. "" " If an agreement is not reached and useful implementation begins not at this time there, this in our opinion would make the tax profile U.S. usefully lower than that of the rulers of "aaa" peer. "The budget of fiscal year 2012 President Barack Obama, released in February, total debt subject to the CAP would 20.8 billion in 2016. The House Republican plan approved on April 15, written by the President of the Commission Budget Paul Ryan of Wisconsin, would need a ceiling of debt at least 19.5 billion dollars, according to data compiled by Bloomberg Government. "Tax Destiny'"This is another indication of the need for the United States to better control its destiny tax, both for his sake and that of the global economy,"said Mohamed El-Erian, CEO at base of Newport Beach, California Pacific Investment Management Co.largest in the world of Bond Fund Manager. "The absence of credible reform tax in the medium term, all segments of American society would be faced with higher borrowing, a weakening of the dollar and less bright prospects for employment, investment and growth."Barton Biggs, the Manager of hedge funds who have purchased stocks when the market reached in March 2009, said that he was still optimistic about equities after S & P revised its Outlook for credit on the United States. "I changed my net long? Not really, "Biggs, who heads based in New York Traxis Partners LP, said in an interview today with Bloomberg Television"Street Smart"with Carol Massar and Matt Miller." "Am I more concerned that I was Friday?" Yeah, I guess I am. "U.S. index fell after the S & P made his announcement, which" immediately sends a warning to the politicians that it will be terrible consequences, unless they bring their acts. " We have a system of Government which is painful but in the long term do good things. "SlumpIndustrial companies industrial companies in the S & P 500 dropped 1.3% a. Caterpillar, large more than material construction manufacturer, fell by 3.1% to $103.90. United Technologies slid $2.1% 81.70.Energy producers in the S & P 500 has dropped by 1.5%, the largest decline in 10 industries. Exxon collapsed 1.4 percent to $83.10 and Chevron decreased by 1.6% to peices $. Oil fell for the first time in four days in New York after Saudi Arabia, the largest exporter in the world, said that the global market has an adequate crude supply.Gap Inc. collapsed 3 percent to $21.79 after Goldman Sachs reduced its rating on the stock to "sell" from "neutral" and said that he sees long-term declines in the comparable store sales. Bank of America Corp. has also reduced its recommendation, cutting the shares to "neutral" from "buy."ChinaThe MSCI all country World Index of shares in 45 countries dropped 1.6% and the Thomson Reuters/index CRB for raw materials fell 0.9%. China increased the requirements of banks to block cash reserve and cool inflation and Central Bank Governor Zhou Xiaochuan, said monetary tightening will continue "any time."Reserve ratios will rise by half a point on 21 April, the Bank of China said on its Web site pushing the requirement of a percentage of 20.5 record for the largest lenders yesterday. The move came less than two weeks after an interest rate increase. Zhou sees no "absolute" limit on how high reserve requirements cannot go, he said, April 16 Community Health Systems Inc. collapsed 4.4% of $30.50. The operator of the hospital said that it provides now $6 cash for Tenet Healthcare Corp.. His previous offer was $ 5 cash cash and $1 in stock. Tenet declined 2.6% to $6.49.U.S. stocks may fall as the & S P 500 gathers momentum downward, by dragging the gauge to the next level of support from about 1275, according to the Credit Switzerland Group AG. The moving average convergence/divergence or MACD, indicator - a measurement used to identify the changes made to the dynamics of stock or direction - has fallen since April 7, when the & S P 500 has reached 1,333.51. ? Swale medium-term momentum requires us to remain sceptical lower possible rupture, "David Sneddon, head of technical analysis of the Credit Switzerland London-based wrote in a report to investors today."

-With the help of Shannon d. Harrington in New York and Adam Haigh in London. Editors: Joanna Ossinger, Michael Regan

To contact the reporters on this story: Rita Nazareth to Sao Paulo to the rnazareth@bloomberg.net; Hwang inyoung in New York to the ihwang7@bloomberg.net

To contact the editor responsible for this story: Michael Regan at mregan12@bloomberg.net

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S & P: "Negative" Outlook on the United States long term debt.

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反序列化操作“Translate”的响应消息的正文时出现错误。读取 XML 数据时，超出最大字符串内容长度配额 (8192)。通过更改在创建 XML 读取器时所使用的 XmlDictionaryReaderQuotas 对象的 MaxStringContentLength 属性，可增加此配额。 第 1 行，位置为 8719。
April 18, 2011, 6:41 PM EDT By Rebecca Christie and Ian Katz

(Updates with economist quote in last paragraph.)

April 18 (Bloomberg) -- Standard & Poor’s put the U.S. government on notice that it risks losing its AAA credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt.

“If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns,” New York-based S&P said today in a report that maintained its top rating on U.S. long-term debt while lowering the outlook to “negative” for the first time.

S&P said there’s a one-in-three chance that the rating might be cut within two years and that its “baseline assumption” is that Congress and the Obama administration will come to terms on a plan to reduce record deficits. Treasuries and the dollar rebounded from early losses following the statement, while stocks declined. Moody’s Investor Service, which has a stable outlook on U.S. debt, today said the U.S. budget debate is “positive” for the country’s credit.

“For most investors there is nowhere else to put their money as the U.S. still has the strongest, deepest, most-liquid markets in the world,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. “There is no alternative.”

Speculation on Greece

The yield on the benchmark 10-year Treasury note jumped as high as 3.45 percent in the minutes after the S&P report from 3.37 percent. The yield was back down to 3.37 percent at 4:27 p.m. as investors focused on speculation that Greece will be unable to avoid a default, driving them to the relative safety of U.S. debt. The Standard & Poor’s 500 index was down 1.1 percent at the 4 p.m. close of trading to 1,305.14 after declining as much as 1.9 percent.

Today’s announcement marks the first time the U.S. credit outlook has been questioned since 1995 and 1996, when a dispute between then-President Bill Clinton and House Speaker Newt Gingrich led to government shutdowns. Fitch Ratings put U.S. debt on a “negative ratings watch” in November 1995 until spring 1996, and Moody’s put some U.S. government bonds on review for a possible downgrade in January 1996.

“We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium-and long-term budgetary challenges by 2013,” S&P said in its statement today.

Pressure for Agreement

The action puts pressure on President Barack Obama and House Republicans to come to agreement on plans to reduce the national debt, which S&P says could rise to 84 percent of gross domestic product by 2013.

“S&P’s outlook certainly adds to motivation in Washington to confront our fiscal challenges,” said Tony Fratto, who served as a White House and U.S. Treasury official under President George W. Bush. “If economic authorities here fail to put in place a credible deficit reduction plan over the next two years, the concern is justified.”

Austan Goolsbee, Obama’s chief economic adviser, rejected the S&P’s negative outlook, calling it a “political judgment” that he said doesn’t deserve “too much weight.”

“They are saying their political judgment is that over the next two years they didn’t see a political agreement” to reduce long-term deficits, Goolsbee, chairman of the Council of Economic Advisers, told Bloomberg Television’s InBusiness with Margaret Brennan. “I don’t think that the S&P’s political judgment is right.”

$4 Trillion

Obama has proposed cutting $4 trillion in cumulative deficits within 12 years through a combination of spending cuts and tax increases. The administration is resisting Republican calls for swifter cuts, while also pushing for a set of rules to enforce spending reductions over time.

Goolsbee said Obama and Republican congressional leaders are “pretty close” in the deficit reduction targets they have announced. Each has set a $4 trillion target, though House Republicans have a timeline of 10 years and the White House proposal would cumulatively cut that amount over 12 years.

House Majority Leader Eric Cantor called the S&P warning “a wake-up call for those in Washington asking Congress to blindly increase the debt limit.”

S&P’s negative outlook “makes clear that the debt-limit increase proposed by the Obama administration must be accompanied by meaningful fiscal reforms that immediately reduce federal spending and stop our nation from digging itself further into debt,” the Virginia Republican said in a statement.

Spending, Taxes

S&P said it wasn’t taking a stand on the right mix of spending and revenue measures, saying only that any agreement must win the acceptance of a “cross section of leaders in both political parties” to be credible.

Sovereign credit quality has gained prominence as European countries from Greece to Portugal struggle to finance their debt. The Group of 20 nations named the U.S. as one of seven large economies that will face deeper scrutiny so their politics don’t derail a global expansion.

Overseas investors hold about half of the roughly $9 trillion in outstanding marketable U.S. debt, including $1.2 trillion held by China. Treasury Secretary Timothy F. Geithner has said the U.S. shouldn’t be borrowing “from the Chinese” and other foreign investors to finance tax cuts for the wealthiest Americans.

Maintaining investor confidence overseas will be a question of political credibility rather than solvency for the U.S., said Lena Komileva, global head of G10 strategy at Brown Brothers Harriman & Co in London.

Lagging Behind

“In the relative universe of sovereign credits, investors are likely to view that the current episode of U.S. actions lagging behind market expectations as transitory which will keep U.S. risk premia contained,” Komileva said. “The euro remains the epicenter of global systemic risk.”

S&P didn’t mention the $14.29 trillion debt ceiling among the risks affecting the U.S. outlook, and it noted that the U.S. has “unique external flexibility” because the dollar is the world’s most-used currency. The ratings company focused on the political calendar, saying that if current budget negotiations fail, it might not be possible to get an agreement until at least the 2014 budget cycle.

Borrowing Limit

The Treasury Department has said the borrowing limit will be reached no later than May 16, at which point it will turn to emergency measures that provide borrowing room through about July 8. Republican leaders in Congress have said they won’t back increasing the debt ceiling unless Obama agrees to more specific steps to trim the budget deficit, estimated to top $1.6 trillion this year.

Alan Krueger, the Treasury’s former chief economist and an economics professor at Princeton University in New Jersey, said the record of S&P during the financial crisis has watered down the impact of its pronouncements on the safety of U.S. debt.

“The surprise to me is that the markets paid as much attention to S&P as they have,” Krueger said. “S&P has no private information, and their track record and judgment have been dismal.”

S&P was too influenced by Wall Street, had insufficient resources and used outdated models to grade mortgage securities that blew up when the U.S. housing market collapsed in 2007, the Senate Permanent Subcommittee on Investigations said in an April 2010 report.

“Clearly, the U.S. fiscal situation is unsustainable unless a large, multiyear fiscal tightening is implemented,” economists at Goldman Sachs Group Inc., including Jan Hatzius, said in a research note. “However, there is no information in today’s report about the fiscal situation that was not already known. Academic research has generally found that rating-agency actions lag market pricing, rather than lead it.”

--With assistance from Carol Massar, Mary Childs, Shannon D. Harrington and Cordell Eddings in New York, and James Rowley and Julie Hirschfeld Davis in Washington. Editors: Christopher Wellisz, Kevin Costelloe

To contact the reporters on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net; Ian Katz in Washington at ikatz2@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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