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Markets plunge as US rating reduced

World markets plunged after a key ratings agency shocked traders with a downgrade to its outlook for US government debt.

Standard & Poor's cut its outlook for sovereign debt in America to negative from stable due to risks from the country's growing deficit.

S&P warned that while the US has a high-income, diversified and flexible economy, the country's ballooning deficit could offset these positives over the next two years.

The move, a serious blow to President Barack Obama's administration, sparked declines on London's FTSE 100 Index, which dropped more than 2%, as well as Wall Street's Dow Jones Industrial Average, which fell nearly 2%.

S&P is one of three main credit rating agencies which offer an informed opinion on the credit-worthiness of a company or government. Moody's and Fitch are its main competitors.

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