Fitch cuts Spain's credit rating, sending markets lower

Another credit rating downgrade sent markets back down on Friday. Reuters reports:

Fitch cut Spain's credit rating by one notch on Friday, sending markets lower and capping a horrible week for a government struggling to convince investors it can solve its economic woes and avoid a Greek-style debt crisis.

Fitch Ratings linked the downgrade to AA+ from AAA to the record levels of household and corporate debt in Spain, as well as mounting public debt, which it said would act as a drag on economic growth.

World equities slid and the euro fell below $1.23 after the downgrade, which stoked fears that Spain, the euro zone's fourth largest economy, could suffer a crisis similar to the one which forced Greece to agree a 110 billion euro rescue with the EU and IMF earlier this month.

Economic data from the US on Friday pointed to continued, albeit modest, improvements in the economy. Bloomberg reports:

Consumer spending paused in April after growing in the first quarter at the fastest pace in three years as Americans used gains in wages to rebuild savings.

Purchases were little changed last month after climbing 0.6 percent in March, indicating an early Easter holiday may have pushed demand into the prior month at the expense of April, according to figures from the Commerce Department today in Washington...

Incomes rose 0.4 percent in April for a second month, matching the survey median. Wages and salaries rose 0.4 percent last month after climbing 0.3 percent in March...

Consumer sentiment improved in May, a report from Thomson Reuters/University of Michigan showed. The group’s confidence index rose to 73.6 from 72.2 in April...

The Institute for Supply Management-Chicago Inc. said today its business barometer fell to 59.7 this month from 63.8 in April, which was the highest level in five years. Figures greater than 50 signal expansion.