Moody’s Ratings was the last of the big three credit rating agencies to downgrade its triple-A credit rating of the US over the mounting deficits facing the world’s biggest economy, not that Treasury secretary Scott Bessent seemed overly worried.
That’s put investors on the back foot as they start a new week, with Australian futures pointing to a softer day on Monday, and amid reports that the mooted listing of Virgin Australia might just take a little longer than previously thought.
Utilities software developer Gentrack will continue the current crop of domestic companies reporting their earnings this week, while finance minister Nicola Willis will continue to pepper hints about her budget before its release this week.
And the Reserve Bank of Australia is due to review its policy this week, with a rate cut pencilled in across the Tasman on Tuesday.
Joining the club
Moody’s cut its US credit rating to Aa1 from Aaa on Friday, joining peers Fitch Ratings and Standard & Poor’s, and noting the track of mounting deficits for the federal government. Treasury secretary Scott Bessent played down the rating cut, telling CNN he didn’t give it much credence.
“Late in Friday’s trading session, Moody’s downgraded the US credit rating from Aaa to Aa1, resulting in a weak close for US Treasuries, which immediately jumped 5 basis points,” Bank of New Zealand senior markets strategist Jason Wong said in a note.
The Moody’s downgrade didn’t halt the gains on Wall Street, with the S&P 500 up 0.7% on Friday, while European markets were also stronger at the end of the week.
Meanwhile, US President Donald Trump’s tax legislation failed at an early hurdle, indicating a protracted budget process is on the cards for the White House.
US vice-president JD Vance met with European Commission president Ursula von der Leyen and Italian prime minister Georgia Meloni on Sunday, with growing optimism that a trans-Atlantic deal can be reached.
A sleepy start
The kiwi dollar traded at 58.80 US cents at 7am in Auckland from 59.06 cents last week, and Australian futures are pointing to a 0.1% decline for the S&P/ASX 200 index today.
The volatility injected into markets in April by Trump’s tariff regime has delayed Virgin Australia’s planned return to the public market, according to a report in the Australian Financial Review, and led to Bain Capital – Virgin’s major owner – withdrawing its pursuit for ASX-listed Insignia Financial.
Australia’s central bank is scheduled to announce its policy review on Tuesday, with economists widely expecting a quarter-point cut to the target cash rate.
And New Zealand’s finance minister Nicola Wilis has been giving interviews ahead of the Thursday budget, indicating some of the upcoming changes that people might see around corporate tax and KiwiSaver settings.
Local data today include the BNZ-Business NZ performance of services index and producer price inflation for the March quarter.
And the shoulder earnings season continues to gather pace, with the flurry of the largest companies such as Ryman Healthcare, Fisher & Paykel Healthcare and Mainfreight due to report next week. Gentrack will report its first-half result this morning.
Reporting by Paul McBeth. Image from Adam Michael Szuscik on Unsplash.
