European Shares Likely To Drift Lower On Concerns About US Debt

(RTTNews) - European stocks may open on a sluggish note Monday after Moody's downgraded the U.S. credit rating by one notch to Aa1 from Aaa, citing rising levels of government debt and interest payments.

The rating agency warned it expects federal deficits to widen to almost nine percent of economic output by 2035, up from 6.4 percent last year.

The downgrade deals a blow to President Donald Trump's narrative of economic strength and prosperity.

In another development, President Donald Trump's sweeping tax-cut bill has won approval from a key congressional committee to advance towards possible passage in the House of Representatives later this week.

Nonpartisan analysts say the bill would add $3-5 trillion in new debt over the next decade.

Elsewhere, China has slapped duties of up to 75 percent on imports of plastics from the U.S., EU, Taiwan and Japan, signaling that trade tensions remain far from resolved.

Under the new ruling, U.S. suppliers face the steepest duty at 74.9 percent while European producers will be subject to a 34.5 percent tariff.

Asian stocks were broadly lower as Chinese industrial output, home prices and retail sales data highlighted ongoing economic challenges, and the White House kept up its rhetorical pressure on trade partners.

U.S. Treasury Secretary Scott Bessent told CNN News on Sunday that tariff rates will soon return to a "reciprocal" level if countries don't reach trade agreements during the 90-day pause.

"President Trump has put them on notice that if you do not negotiate in good faith, you will ratchet back up to your April 2 level," Bessent said.

The dollar slipped in Asian trade while Treasury yields rose due to mounting concern over American debt.

Gold ticked higher and traded above $3,220 per ounce while oil traded lower, with talks to end the war in Ukraine and U.S. debt concerns in focus.

U.S. stocks ended higher on Friday after closing mixed for two straight sessions.

Traders largely shrugged off data that showed U.S. consumer sentiment unexpectedly fell to the second-lowest level on record and inflation expectations climbed to multi-decade highs.

The narrower Dow climbed 0.8 percent and gained 3.4 percent for the week on optimism over easing U.S.-China trade tensions.

The S&P 500 gained 0.7 percent, extending its winning streak to five sessions and posting a strong weekly gain of over 5 percent.

The tech-heavy Nasdaq Composite added half a percent and surged 7.2 percent for the week.

European stocks closed higher on Friday after officials said trade negotiations between the EU and the U.S. are making progress.

The pan European STOXX 600 gained 0.4 percent. The German DAX edged up by 0.3 percent, France's CAC 40 rose 0.4 percent and the U.K.'s FTSE 100 advanced 0.6 percent.