Bill Gross, the co-chief investment officer of bond giant Pacific Investment Management Co., said market fears that the U.S. is at risk of losing its AAA credit rating is sending the U.S. dollar, stocks and bonds under severe selling pressure on Thursday.
Asked what is driving the market declines, Gross told Reuters via email that investors fear the U.S. is going the way of the U.K. -- losing AAA rating which affects all financial assets and the dollar.
Thursday, Standard & Poor's lowered its outlook on Britain to negative from stable, threatening the nation's top AAA rating. Britain faces a one in three chance of a ratings cut as debt approaches 100 percent of gross domestic product.
European shares fell, weighed down by banks and commodities, as S&P's potential UK credit cut added to worries sparked by news on Wednesday that Federal Reserve policy-makers had cut their U.S. growth forecasts over the next three years.
The pan-European FTSEurofirst 300 <.FTEU3> index of top shares fell 2.1 percent to 857.52 points, breaking five successive sessions of gains.
U.S. equities were down as well. The Dow Jones industrial average <.DJI> was down 182.55 points, or 2.17 percent, at 8,239.49. The Standard & Poor's 500 Index <.SPX> was down 21.26 points, or 2.35 percent, at 882.21. The Nasdaq Composite Index <.IXIC> was down 44.89 points, or 2.60 percent, at 1,682.95.
U.S. Treasury debt prices moved in sympathy with equities.
The benchmark 10-year U.S. Treasury note fell 47/32, with the yield at 3.3625 percent. The 2-year U.S. Treasury note dropped 2/32, with the yield at 0.8587 percent. The 30-year U.S. Treasury bond plunged 91/32, with the yield at 4.3106 percent.
In currencies, the dollar was down against a basket of major trading-partner currencies, with the U.S. Dollar Index <.DXY> down 1.01 percent at 80.369 from a previous session close of 81.190.
The dollar extended losses against the yen on Thursday, dipping below 94 yen for the first time in two months.
(Reporting by Jennifer Ablan; Editing by Theodore d'Afflisio)