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How Bad Will Economic News Get?

Investors, brace yourselves for more potential chaos.

After a week of massive declines across global financial markets, the stage was set for more selling pressure in Europe and on Wall Street as stock exchanges in Asia opened earlier this morning with bouts of panic selling.

Japan’s Nikkei 225 average fell 1.4 percent in early trading. Middle Eastern markets, which trade Sundays, reacted with swift sell-offs. Israel’s Tel Aviv stock exchange dropped 7 percent, while in Egypt, stocks fell over 4 percent.

The catalyst: a late Friday downgrade of the United States’ AAA credit rating by Standard & Poor’s, followed by the credit agency’s weekend warning that further downgrades could come if Washington remains mired in political gridlock over solving the nation’s long-term debt woes.

The USA’s first-ever downgrade could raise borrowing costs for government, business and consumers. For already skittish investors, it’s just the latest in a string of jolting bad news: lingering high unemployment, a widening European debt crisis and eroding consumer confidence in the economy and political leaders.…ey=mod|mostview

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