The US downgrade on account of high debt is likely to create more negative impact on equity markets as compared to treasuries. We witnessed consistent two-year rally in risk assets and reached very close to financial recovery, but the support was built on straw and sticks, not on bricks. The problem of excessive debt is global and it is not just US stock markets at stall speed. It is prevalent from Brazil to China and also in other parts of Europe as well as Asia.

The markets have made it clear on Friday that, if Silvio Berlusconi steps down then Italy will financially do better. The reaction in the markets was very serious, as the reports released in morning from the journalists which were very close to the prime minister. The Italian indices which were down by 2% suddenly turned into green and showed almost 4% recovery from their intraday low. Obviously, markets felt better off without their billionaire minister, as the yield of Italian bonds also slashed across the curve.

US stocks aroused, halting two weeks continuous drop in benchmark index as financial estimation precisely met investor’s expectations. Markets also got strong clues from the endorsement of debt-reduction programs which relieved the concerns about European debt crisis up to considerable extent. The eurozone situation is likely to arrive at some conclusion and consumer confidence details attracted investors to risky assets like equity and mutual funds.

The erroneous message sent by S&P on Thursday, frightened the French investors who were already worried over worsening debt crisis of eurozone countries. The Standard & Poor erroneously proclaimed the downgrade of credit rating of France which resulted in worst day in the history of French government bonds.