Gulliver says US is still at risk of ratings downgrade
Tuesday 02 August 2011
Stuart Gulliver, HSBC's chief executive, yesterday welcomed the deal to raise America's debt ceiling but warned that the US was still at risk of a downgrade from credit ratings agencies.
As he unveiled a first-half group profit boosted by a 23-per-cent jump in North American profits, the bank's chief executive said the proposed debt agreement should "restore some confidence" to the markets, preventing a default that would have been hugely destabilising to a global economy already reeling from the European debt crisis.
"However, I'm not sure we won't still see a downgrade, which is still quite possible," Mr Gulliver said, adding that he was "uncertain what impact that would have on central banks".
According to their current mandates, central banks can hold only AAA-rated bonds and would theoretically be required to dump US Treasuries in the event of a downgrade. However, economists doubt this would hapen because such widespread selling of Treasuries would further reduce their value and add to the sense of panic in the markets. Furthermore, as Mr Gulliver pointed out, there would still be no viable alternative to the dollar. "On a secular basis the US dollar will continue to weaken, but on a cyclical basis there is no alternative. The eurozone crisis has parked the dollar for a while," he said, predicting that in 10 to 15 years' time the world will have three reserve currencies – the dollar, the euro and the Chinese yuan.
US markets bounced yesterday morning on optimism that a deal will be done to raise America's debt ceiling. However, the Dow Jones was down 1 per cent in afternoon trading after disappointing manufacturing data for July dragged down sentiment.
- 1 Cyclist who knocked down three-year-old girl says his life has been 'destroyed'
- 2 A politically correct lefty goes to see Top Gear live – you'll probably believe what happened next
- 3 Young Preston fan has play-off hero Jermaine Beckford's shirt stolen from him at Wembley - which then appears for sale on Gumtree
- 4 Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
- 5 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
The day that Britain resigned as a global power
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
A nation of inequality: How the UK is failing to feed its most vulnerable people
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...