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Top of the Agenda: World Leaders Respond to U.S. Downgrade

World finance ministers and central bank governors from the G7 pledged Sunday to take "coordinated action" (WSJ) to ensure liquidity and support financial markets, following mounting global economic fears over last week's U.S. debt downgrade and a rising risk of eurozone sovereign debt contagion to Italy and Spain.

After a sharp drop in Asian stock markets on Monday, the G20 issued a similar call out of South Korea, signaling the group would take "all necessary initiatives" (AFP) to ensure global financial stability.

The European Central Bank intervened (FT) in bond markets shortly after, buying up Italian and Spanish debt and pushing yields down sixty-five basis points, as Spanish and Italian stock markets rebounded. However, European stocks resumed a sell-off (Bloomberg), as investors quickly turned back their attention to the economic ramifications of the U.S. downgrade.

The dollar continued to weaken against most major currencies, and U.S. index futures remained down (NYT) ahead of markets opening on Wall Street.

Analysis:

The public's outpouring of disgust over the debt-ceiling quarrel, last week's financial market eruption, and the S&P downgrade could focus people on fixing America's broken political system, writes theFinancial Times's Clive Crook.

Jittery investors are influencing fiscal and economic policy more than the national leaders supposedly in charge of rescue efforts, says Deutsche Welle's Bernd Riegert.

Standard & Poor's decision to strip the United States of its triple-A credit rating signals a turning point for the entire global economy, says TIME's Michael Schuman.