S&P To Deeply Cut Us Ratings If Debt Payment Missed

Fears of a technical default have been rising after budget negotiations between Democrats and Republicans fell apart in Washington earlier this week. Even a brief default by the United States would immediately increase the country's borrowing costs, weighing on the fragile economic recovery and eroding the dollar's status as a reserve currency. On Aug. 4, the Treasury Department is due to pay off $30 billion in maturing short-term debt. With the debt talks stalled, new ideas are surfacing such as prioritizing debt payments. But Treasury Secretary Timothy Geithner warned lawmakers on Wednesday that such a move would still cause investors to shun U.S. Treasury securities.

United States now borrows roughly 40 cents of every dollar it spends; prioritizing payments with no debt limit increase would require cutting 40 percent of all government expenditures. S&P is not the first agency to say it will downgrade the United States if a payment is missed. Rival credit rater Moody's on June 2 was the first to say it would downgrade the United States shortly after a possible ceiling-related default, but not as deeply -- to the Aa range.

US MARKETS:  The US markets closed higher for the fourth straight day on Thursday (30.06.2011), all the major indices were up by over a percent after Greece cleared the final hurdle needed to receive its next installment of emergency loans. Greek lawmakers passed a cost-cutting bill that had to be approved before international lenders would release $17 billion in rescue funds to Greece. The investors' morale was also boosted by a report of pickup in manufacturing around Chicago. A Chicago-area manufacturing gauge unexpectedly accelerated in June, according to data released Thursday, the Chicago business barometer, which also is called the Chicago PMI, rose to a 61.1% reading from a 56.6% level in May to break a three-month losing run. The Dow Jones Industrial Average surged by 152.92 points, or 1.25 percent, to 12,414.34. The S&P 500 added 13.23 points, or 1.01 percent, to 1,320.64 and the Nasdaq composite gained 33.03 points, or 1.21 percent, to 2,773.52. Crude prices moved higher on Thursday, extending their rally for a second day on expectations Greece's debt crisis would be resolved. Though, the prices were down by 7 percent for the month and 10 percent for the quarter. A weak dollar, Greece's passage of an austerity plan and supportive Chicago manufacturing data collectively lent support to crude prices. Benchmark crude for August delivery ended up 65 cents, or 0.69 percent, at $95.42 a barrel, after trading in a range from $93.88 to $95.82 on the New York Mercantile Exchange. In London, August Brent crude rose 8 cents, or 0.1%, to $112.48 a barrel on the ICE.

Bank of America Corp. reached an $8.5 billion settlement with investors over claims it sold them bad loans. The investors said Bank of America violated agreements with them by selling them low-quality mortgage-backed securities that lost value when the housing market collapsed.Meanwhile Asian equities carried forward the gaining momentum this Thursday as investors continued to show buying interests on being encouraged by the headway seen in Greece which inched closer towards adopting the crucial but harsh package of austerity measures to avoid a default. The overnight Wall Street too exhibited optimistic trends thereby supporting the regional sentiments. The benchmarks in China and Hong Kong gained a lot of traction in the morning trades amassing around one and half a percent points as funds contnued to chase out performers to make portfolios look healthier. The Japanese stocks advanced led by utilities companies which rose on expectations of more nuclear reactor restarts.

“A tragic irony of life is that we so often achieve success or financial independence after the chief reason for which we sought it has passed away”