Asia share markets fall as US credit downgrade spooks investors

Asian share markets opened weaker Monday after Standard and Poor's downgraded the U.S. credit rating, fueling fears of global economic instability.

The U.S. dollar was also weaker in morning trades across Asia and the Pacific, while gold rose as investors fled to the precious metal as a safe haven, The Wall Street Journal reported.

Tokyo's Nikkei 225 index lost 1.3 percent by mid-morning, the Australian market was 1.1 percent down at a two-year low and Hong Kong fell 3.5 percent. Markets were also weaker in Singapore, South Korea and Taiwan.

"For share markets the downgrade should have been discounted already, but it adds to uncertainty and reinforces the pressure for premature fiscal tightening in the U.S. It's also a blow to U.S. confidence," AMP Capital Investors investment strategy chief Shane Oliver told the Journal in Sydney.

The dollar slipped 0.27 percent against the yen and was almost 0.5 percent cheaper versus the euro, despite Europe's ongoing debt crisis. Gold meanwhile hit a new nominal record high of $1,692.74.

Finance chiefs in Asia and the G7 group of rich countries sought to reassure markets that the downgrade of U.S. debt to AA+ from AAA was not the end of the world.

(Earlier on the GlobalPost: S&P downgrades US credit rating)

The White House has called Standard and Poor's rating decision "amateurish" and Treasury Secretary Timothy Geithner said Sunday the agency showed "terrible judgment".

"They've handled themselves very poorly. And they've shown a stunning lack of knowledge about the basic U.S. fiscal budget math," Geithner told CNBC in his first public comments about the credit rating decision, AP reported.

The G7 issued a statement vowing to buttress global financial stability, while the European Central Bank pledged to buy eurozone bonds to stem the continent's debt crisis, AFP reported.

"We are committed to taking coordinated action where needed, to ensuring liquidity, and to supporting financial market functioning, financial stability and economic growth," the statement said.

Analysts noted that while Asian markets were hurting, many were off their morning lows.

"The downgrade to U.S. debt is unlikely to have any material impact on the U.S. economy or on Asian economies," analysts at UBS wrote in a note on Monday, according to The New York Times.

The 10-year Treasury yield increased modestly in Singapore trades and on two-year Treasurys it fell, in what The Wall Street Journal said was a sign that investors continued to see U.S. debt as a safe haven.