MercoPress. South Atlantic News Agency

Portugal credit rating downgrade sank the Euro and Wall Street

Fitch Ratings cut Portugal's sovereign credit rating by one notch to AA-minus

The Euro sank to a 10-month low against the dollar and US stocks fell on Wednesday after a downgrade of Portugal's credit rating raised worries about Europe's growing debt burden.

Commodity prices fell as the dollar gained ground, with gold at a six-week low. Prices of US Treasuries, which typically are a safe haven when risk appetite ebbs, declined as investors sold bonds on worries about a massive supply of new debt.

Fitch Ratings cut Portugal's sovereign credit rating by one notch to AA-minus and warned of a possible further downgrade.

Ongoing speculation that debt-stricken Greece may have a difficult time securing aid at a European Union summit that begins on Thursday highlighted problems facing the Euro zone, and helped push the Euro to a lifetime low against the Swiss franc.

On Wall Street, stocks fell as the cut in Portugal's debt rating prompted profit-taking after a recent rally that had driven the Dow industrials and benchmark S&P 500 to 18-month highs on Tuesday.

Concerns about the fiscal situation of the Euro-zone weighed on the Euro and created safe-haven demand for the dollar, which climbed to its highest level since May last year against a basket of currencies. Following the Fitch announcement, the Euro hit its weakest level against the greenback since early May 2009.

Meantime oil prices also fell after government data showed a larger-than-expected increase in US crude stocks last week.

Increased aversion to risk did not translate into demand for US Treasuries, though. Bond prices fell sharply, sending benchmark 10-year yields to their highest in a month, on concerns about a large government debt issuance ahead.

A 42 billion USD auction of five-year U.S. Treasury notes drew poor investor demand, increasing concerns about Thursday's auction of 32 billion in seven-year notes.