G7 Finance Ministers To Hold Conference Call On U.S. Credit ...

WASHINGTON (CNN) -- Investors are waiting anxiously for major world markets to open for Monday trading, following the U.S. credit rating downgrade to AA+ from the top rank of AAA.Stock futures tumbled more than 2% at the start of electronic trading Sunday, signaling a nasty investor reaction to the downgrade by Standard and Poor's.According to data from the Chicago Mercantile Exchange, S&P 500 futures fell 30 points, or 2.7%. Nasdaq-100 futures contracts slipped 54 points, or 2.5%. Dow Jones industrial average futures were 292 points, or 2.6%, lower.The futures were the first gauge of investor sentiment following Friday night's downgrade, removing the United States' AAA status for the first time. They give an indication of how investors will react when regular-hours U.S. trading begins at 9:30 a.m. ET Monday.U.S. futures trading began at 6 p.m. ET, two hours before the opening of the key Tokyo stock market.Also on Sunday evening, Treasury Secretary Tim Geithner was expected to take part in a conference call with representatives of the other G7 nations to discuss the downgraded U.S. credit rating, a G7 official told CNN.The G7 nations are the United Kingdom, France, Germany, Italy, Japan, Canada and the United States.Middle Eastern markets, the first to open since the downgrade, were sharply lower on Sunday. Israel's market temporarily halted trading at one point and finished down more than 6%, while the Dubai Financial Market General Index fell 3.7%.The General Index on the Abu Dhabi Securities Exchange was down more than 2.5%, while in Saudi Arabia, the Tadawul All-Share Index dropped nearly 5.5% in trading Saturday.U.S. officials are talking to a "wide range of investors" about the downgrade by the credit agency to try to "mitigate" any short-term negative impact from Friday's announcement, a Treasury official told CNN.Top Standard & Poor's officials said Sunday that the downgraded credit rating for the United States was both a call for political consensus on significant deficit reduction and a warning of possible further credit problems down the road."We have a negative outlook on the rating and that means that we think the risks currently on the rating are to the downside," said David Beers, the S&P global head of sovereign ratings, on "Fox News Sunday."However, Beers said markets were reacting to the debt crises in some European countries and fears of a global economic slump, rather than the U.S. credit downgrade alone.The European Central Bank, in a bid to calm markets, said on Sunday it would implement a bond-purchase program and welcomed the announcements by Italy and Spain on new measures meant to reduce their deficits. It told the governments of those countries that a "decisive and swift implementation" of reforms is "essential."John Chambers, the S&P head of sovereign ratings, told ABC's "This Week" program Saturday that it could take years for the United States to return to AAA status."Well, if history is a guide, it could take a while," Chambers said. "We've had five governments that lost their AAA that got it back. The amount of time that it took for those five range from nine years to 18 years, so it takes a while."The agency's concerns "are centered on the political side and on the fiscal side," Chambers said."So it would take a stabilization of the debt as a share of the economy and eventual decline," he said. "And it would take, I think, more ability to reach consensus in Washington than what we're observing now."Both Beers and Bill Miller, chairman and chief investment officer at Legg Mason Capital Management, told the Fox program that they don't expect the U.S. downgrade to cause a spike in interest rates, one of the possible results of the higher risk now attached to U.S. debt."I don't think we'll pay more in interest," Miller said, calling the downgrade more of a symbolic event than an economic event. However, he warned of continuing market volatility in coming days driven by uncertainty.Rating agencies such as S&P, Moody's and Fitch analyze risk and give debt a grade that is supposed to reflect the borrower's ability to repay its loans. The safest bets are stamped AAA. That's where the U.S. debt has stood for years.Moody's first assigned the United States an AAA rating in 1917. Fitch and Moody's, the other two main credit ratings agencies, maintained the AAA rating for the United States after last week's debt deal, though Moody's lowered its outlook on U.S. debt to "negative."A negative outlook indicates the possibility that Moody's could downgrade the country's sovereign credit rating within a year or two.Beers told CNN on Saturday there were two reasons for the downgrade. The first centered "around the uncertainty we think the political process, as it's playing out in fiscal policy, is creating in the U.S.," Beers said. He cited the difficulty in creating consensus across the political spectrum when it comes to fiscal policy choices.Second, the recent plan reached by Congress that raised the debt ceiling and provided some reductions in spending was not enough in the agency's eyes, he said.Stock market values fell Friday across Europe and Asia, where reaction to news of the U.S. credit downgrade was mixed.Beers of S&P repeated calls for Democrats and Republicans to find consensus on further significant deficit reduction steps. The debt ceiling deal passed last week by Congress and signed by President Barack Obama represents a potential first step by implementing initial spending cuts and calling for further deficit reduction steps by the end of the year, he said.Under the debt ceiling agreement, a special bipartisan congressional committee will recommend a series of deficit reduction steps to Congress by November, with a vote required by each chamber by the end of the year. The committee plan cannot be amended and would require a simple majority to pass.If the committee's plan fails to pass Congress or get signed into law by Obama, across-the-board spending cuts of discretionary spending, including the military budget, would be automatic. The so-called trigger mechanism for the automatic cuts is intended to apply pressure on legislators to work out an acceptable deal through the committee.The 12-member panel will comprise an equal number of Democrats and Republicans from the House and Senate. It is expected to come up with a package of reforms to entitlement programs such as Medicare and Social Security, as well as changes to the tax code that would lower rates and eliminate loopholes and subsidies to increase revenue.Republicans have opposed any tax increases or increased tax revenue, while Democrats oppose substantive changes to entitlement programs.A possible committee member, House Budget Chairman Paul Ryan, R-Wisconsin, told "Fox News Sunday" he had doubts about whether the panel can achieve what needs to get done.Ryan, a fiscal conservative favored by the tea party movement, said he would serve on the panel if asked but added: "I'm not putting my stock in this committee.""I think people are overemphasizing what this committee is going to achieve," Ryan said. Democrats are unwilling to make the kinds of reforms needed in entitlement programs such as Medicare and Social Security to effectively rein in rising long-term costs, he said.However, Obama's chief political strategist, David Axelrod, blamed the conservative tea party movement for the S&P downgrade, saying the linking of a necessary debt ceiling increase to political debate on spending cuts caused the gridlock cited by the ratings agency."There's no doubt the brinkmanship that we saw was atrocious, and that contributed to their analysis," Axelrod said on the CBS program "Face the Nation."Obama pushed for a so-called "grand bargain" that would balance deficit reduction among spending cuts, entitlement reforms and tax reform, while House Republicans, spurred by the tea party support that helped them gain a majority in last November's vote, rejected that approach, Axelrod saidHouse Speaker John Boehner, who at one point was considering a larger deal pushed by Obama, "had to yield to the most strident voice in his party ... and this is the result," Axelrod said, adding: "The fact of the matter is that this is essentially a tea party downgrade."On the same program, Republican Sen. Lindsey Graham of South Carolina disputed Axelrod's contention, arguing that "the tea party's not the problem" and "Washington was broken before they got here."U.S. Treasury officials received S&P's analysis Friday afternoon and alerted the agency to an error that inflated U.S. deficits by $2 trillion, said an administration official, who was not authorized to speak for attribution. The agency acknowledged the mistake, but said it was sticking with its decision.The administration official called it "a facts-be-damned decision ... Their analysis was way off, but they wouldn't budge."Saturday, Gene Sperling, director of Obama's National Economic Council, criticized S&P's call."The magnitude of their error and the amateurism it displayed, combined with their willingness to simply change on the spot their lead rationale in their press release once the error was pointed out, was breathtaking. It smacked of an institution starting with a conclusion and shaping any arguments to fit it," he said.But Beers defended his agency's move on Sunday, telling the Fox program: "The underlying debt burden of the U.S. government is rising and will continue to rise over the next decade."CNN's Athena Jones, Candy Crowley, Christine Romans, Ben Brumfield, Laura Smith-Spark, Mariano Castillo, Mike Pearson and Kendra Petersen contributed to this report.

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