Finance bosses from the world's top economies discussed market stability as U.S. stock indexes opened sharply lower on Sunday amid concern that a downgrade of the nation's credit rating may worsen an economic slowdown.
The G7 members issued a statement late Sunday pledging cooperation to commit to any measures leading to financial stability and growth.
Finance Minister Jim Flaherty, who took part in the G7 emergency conference call, said the right actions "have been agreed to in order to ensure ongoing global financial stability and growth."
As the G7 leaders spoke, deputies from Group of Group of 20 advanced and developing economies also discussed ways to end the market instability.
The conversation came after Middle East markets opened to find stocks tumbling in the wake of credit rating agency Standard and Poor's decision to bump the U.S.'s sterling credit rating down a level.
The Dubai Financial Market's benchmark index plummeted more than 5 per cent in early trading while indexes in Abu Dhabi and Qatar shed between 2.5 and 3 per cent.
Nearly all Middle East markets operate Sunday to Thursday, making them the first to respond to S&P's decision.
Investors worldwide are watching the Middle East with concern that shares will take a similar dive when North American, Asian and European markets open on Monday.
In Tokyo by 7 a.m., S&P 500 stock futures declined 2.1 per cent to 1,172.3. Dow Jones Industrial Average futures lost 253 points, or 2.2 per cent to 11,149.
An S&P official added to fears of a global stock market slide on Sunday when he warned that there is a 1-in-3 chance that the U.S. credit rating could be downgraded again. The agency's managing director John Chambers told ABC's "This Week" that if the U.S. fiscal situation erodes over the next six to 24 months another demotion will be considered.
Japan eying moves
Amid concerns of a global stock slump, Japan's Senior Vice Finance Minister Fumihiko Igarashi hinted that Tokyo would intervene again in the currency market if major fluctuations continued.
On Thursday, Tokyo took steps to weaken the yen to protect Japan's recovery from an earthquake and tsunami in March.
"It's not over yet. We will act again if we see speculative moves," Igarashi told public broadcaster NHK on Sunday, referring to the possibility of another yen intervention.
In China, the largest foreign holder of U.S. debt, the ruling Communist Party's newspaper ran an editorial on Sunday calling it a "warning bell" for countries like China whose economies are heavily reliant on exports.
Downgrade anxiety
As traders continue to watch international markets, a fiscal expert is calling on investors to measure their response to the new U.S. debt rating.
Peter Drake, vice-president of economic research at Fidelity Investments, said the U.S. downgrade was unfortunate but not entirely unexpected.
"What I think is really important is for investors not to panic over this," he told Â鶹´«Ã½ Channel on Sunday.
Drake pointed to widespread anxiety over the U.S. fiscal crisis of 2008 and said that even then, markets recovered.
"You need to think of this as one more step along this rather long and rather torturous road to get U.S. debt under control," he said.
While Drake said it's too early to predict whether worries of a double-dip recession will become reality, he stressed that Canada is in a better fiscal position than the U.S. right now.
Canada's Finance Minister Jim Flaherty said Friday that the recent economic uncertainty may have some adverse effects on the Canadian economy, but he said the country is well positioned to deal with the "global headwinds."
"Canada is not an island," Flaherty said in a statement. "We are a trading nation, with about a third of output generated by exports and deep linkages with the U.S. economy."
With files from The Associated Press
