World markets braced for flight

World markets are expected to open heavily down on Monday after the decision by Standard & Poor's to downgrade the US credit rating from AAA to AA+.

After a week in which some $2.5 trillion was devalued in global equities, investors are set to seek further shelter from traditional investments, with gold likely to continue their rise, the Telegraph reported.

Investors who had been placing their bets on US government debt will be quick to move their investments when trading begins tomorrow, the Telegraph predicted today.

The US downgrade is also expected to push the price of gold northwards, despite a slip from its record of $1,684.90 to $1,651.80 an ounce in New York on Friday, as some investors sold the precious metal to cover losses in other markets. Investors will probably seek the UK's government debt, which still enjoys a AAA rating.

Fitch and Moody's still have AAA ratings on the US, but S&P's move will send shock waves through the markets when trading reopens.

Last week, Wall Street experienced its worst week since September 2008, with the S&P 500 falling 7.2pc and the Dow Jones Industrial Average lost 5.2pc.

Analysts predicted a rush on safe-haven currencies such as the Swiss franc and the Japanese yen, but were divided over the immediate impact on the dollar.

Capital Economics said S&P's decision to "finally pull the trigger" would cause the dollar to fall, but that this would be relatively short-lived.

“The once-unthinkable loss of the AAA rating will constitute a further hit to already fragile business and consumer confidence,” Mohamed El-Erian of Pacific Investment wrote, according to Bloomberg.