London open: Stocks fall after Moody's downgrades US credit rating
By Michele Maatouk
Date: Monday 19 May 2025
(Sharecast News) - London stocks fell in early trade on Monday as sentiment took a hit after Moody's downgraded its credit rating on the US.
At 0825 BST, the FTSE 100 was down 0.3% at 8,661.91.
Moody's announced late on Friday that it was cutting the rating to Aa1 from the highest triple-A rating.
"This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns," it said.
Moody's said "successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs".
Kathleen Brooks, research director at XTB, said: "The downgrade is to be expected. S&P 500 ditched the US triple A grade back in 2011. Back then, S&P said that the rating downgrade was due to risks around governance and policy making stability, and downwardly revised its revenue forecasts for the US government. Exactly the same problems exist 14 years later. The House Republicans are currently debating President Trump's fiscal bill that is designed to reduce taxes and cut government spending but would still increase the deficit.
"The difference between today and 2011 is the sheer scale of the US's debt problem. Moody's expects the current fiscal bill to cost $3.8 trillion over the next decade, and federal deficits to widen. They predict the deficit could balloon to 9% of GDP by 2035, up from 6.4% in 2024, driven mainly by high interest payments."
On home shores, investors mulled the latest house price index from Rightmove, which showed that house prices edged higher in May, although the rate of growth was notably smaller than usual for the time of year.
UK house prices rose by 0.6% in May, or by 1.2% year-on-year. That compares to April's 1.4% uplift.
The average house price now stands at a record high of £379,517, while agreed sales were up 5% year-on-year.
However, Rightmove said May's price increase was the lowest for this time of year since 2016, as supply continued to catch up with demand.
The number of available homes for sale is now at a 10-year high, while the amount of new properties coming to market is 14% higher year-on-year.
May also suffered from a dip in demand following changes to stamp duty thresholds in April.
Rightmove's Colleen Babcock said: "It's another new price record this month. But having seen a May price record for the last five years, it appears to be driven more by seasonal factors given that new buyer demand has slowed.
"This month's price increase being the lowest in May for nine years is a sign of a market that favours buyers and is more subdued than usual."
However, Rightmove also acknowledged that the latest cut to Bank Rate could boost both buyer affordability and activity later in the year.
In equity markets, oil giant BP gushed lower amid weaker oil prices and after a downgrade to 'hold' at Jefferies.
Troubled bus and rail operator Mobico edged lower even as it reported a 9% rise in first-quarter revenues, driven by a strong performance in Spain, while the UK and Germany reported declines.
Revenue from the ALSA division in Spain surged by 13%, while revenue in the UK and Germany was down 2% and 3% respectively. North America, where the group is offloading its school bus operations, saw a 13% increase.
Precious metals miner Fresnillo shot to the top of the FTSE 100 as gold prices rose, while Hochschild also rallied.
Drinks giant Diageo gained as it reiterated guidance for full-year organic sales and operating profits after a solid pickup in underlying growth in the third quarter.
Organic net sales increased by 5.9% in the three months to 31 March, compared with a 1.0% increase in the first half, though this was mainly a result of "significant phasing benefits" which are expected to reverse in the fourth quarter.
The company also gave its first financial estimate of the impact of tariffs on its business, calculating a $150m hit on an annualised basis before any mitigation measures.
Genuit advanced as the pipe maker held annual guidance after an 8.5% rise in revenue from the first four months of the year and added that it was not directly exposed to US tariffs.
Ryanair was in focus after the budget airline reported a 16% decline in full-year profit after tax to €1.61bn as average fares declined 7%.
Market Movers
FTSE 100 (UKX) 8,661.91 -0.26%
FTSE 250 (MCX) 20,921.30 -0.24%
techMARK (TASX) 4,734.85 -0.06%
FTSE 100 - Risers
Fresnillo (FRES) 1,038.00p 3.80%
Diageo (DGE) 2,204.00p 2.42%
BT Group (BT.A) 167.70p 0.90%
Tesco (TSCO) 365.20p 0.63%
United Utilities Group (UU.) 1,121.00p 0.63%
Vodafone Group (VOD) 71.62p 0.62%
Haleon (HLN) 406.30p 0.57%
easyJet (EZJ) 545.60p 0.52%
GSK (GSK) 1,401.50p 0.50%
Severn Trent (SVT) 2,686.00p 0.45%
FTSE 100 - Fallers
BP (BP.) 367.10p -1.53%
Scottish Mortgage Inv Trust (SMT) 996.60p -1.38%
The Sage Group (SGE) 1,228.00p -1.25%
St James's Place (STJ) 1,080.50p -1.23%
Halma (HLMA) 2,966.00p -1.13%
InterContinental Hotels Group (IHG) 8,976.00p -1.08%
Schroders (SDR) 344.40p -1.03%
Pershing Square Holdings Ltd NPV (PSH) 3,760.00p -1.00%
Rio Tinto (RIO) 4,629.50p -0.99%
Alliance Witan (ALW) 1,198.00p -0.99%
FTSE 250 - Risers
Senior (SNR) 165.40p 3.37%
Hochschild Mining (HOC) 267.60p 3.08%
JPMorgan Indian Investment Trust (JII) 1,048.00p 2.75%
Bakkavor Group (BAKK) 198.00p 1.54%
Endeavour Mining (EDV) 2,084.00p 1.26%
Ferrexpo (FXPO) 66.00p 1.23%
Chemring Group (CHG) 433.50p 1.05%
HICL Infrastructure (HICL) 116.20p 1.04%
Mobico Group (MCG) 27.98p 0.94%
Urban Logistics Reit (SHED) 155.00p 0.91%
FTSE 250 - Fallers
Discoverie Group (DSCV) 612.00p -4.38%
IP Group (IPO) 43.00p -3.48%
Ithaca Energy (ITH) 136.30p -3.47%
Auction Technology Group (ATG) 480.00p -3.32%
Sirius Real Estate Ltd. (SRE) 90.60p -3.31%
Hill and Smith (HILS) 1,886.00p -2.38%
Big Yellow Group (BYG) 1,000.00p -2.34%
Kier Group (KIE) 157.40p -2.24%
Indivior (INDV) 828.00p -1.95%
Raspberry PI Holdings (RPI) 508.00p -1.84%
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