CREDIT WARNING HITS BRITISH MARKETS - Stock markets around the world took a hit yesterday afternoon after ratings agency Standard and Poor's changed the UK's outlook to negative. It said rising UK debt levels were a major concern, and that its debt could be close to 100% of gross domestic product, and remain at that level in the medium term.
A ratings downgrade would make it pricier for the UK to borrow on international markets and the move stoked fears that other economies, like the US, might face a similar fate.
Justin Urquhart-Stewart of Seven Investment Managers in London said the S&P news knocked the stuffing out of sterling, though the currency did recover slightly later as attention turned to questions about the US's ratings.
The S&P move also affected the stock market, and Mr Urquhart-Stewart said the rally of recent weeks had petered out as investors realised that economies were still weakening, though not as quickly as previously.
On BA, the analyst said the airline had been badly hit by the fall in business class passengers, adding that markets had been expecting losses of only around £120m. He pointed out that BA's pension deficit was now only slightly less than its total capital.
