LONDON/NEW YORK (Reuters) - Stock index futures fell sharply on Monday, pointing to further declines in equities, as Standard & Poor's decision to cut the country's top-tier AAA credit rating rattled already jittery investors.
Technical charts signaled further losses for a key stock index at a time when the equity markets were also concerned about the possibility of the euro zone debt crisis spreading to countries such as Italy and Spain. Safe-haven assets were in demand, with gold hitting another record high.
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Last week's steep sell-off in equities, which wiped about $2.5 trillion off global markets, was set to continue. Futures for the S&P 500, for the Dow Jones and for the Nasdaq 100 were down 2.4 to 2.8 percent.
On Friday, U.S. equities closed out their worst week in more than two years on lingering concerns about sluggish economic growth and on high public debt in Europe and the United States.
Sentiment worsened further after the S&P cut the U.S. long-term credit rating by a notch to AA-plus late on Friday on concerns about the debt situation in the world's largest economy. The rating cut could eventually raise borrowing costs for the American government, companies and consumers.
Moody's repeated a warning on Monday it could downgrade the United States before 2013 if the fiscal or economic outlook weakens significantly, but said it saw the potential for a new debt agreement in Washington to cut the budget deficit before then.
Charts for the Standard & Poor's 500 Index <.SPX>, which closed below 1,200 points on Friday, showed that momentum oscillators were low, but not to the extent that the index could not go down further. Analysts said the market could test Friday's bottom of 1,168.09 again.
"Looking further out, the break of such a major uptrend is likely to have more lasting repercussions than what we have seen so far. It would be very surprising if we didn't see a 38.2 percent retracement of the long-term uptrend, implying a downside target of around 1,100 in the medium term," said Bill McNamara, technical analyst at Charles Stanley.
The impact of S&P's rating cut was strongly felt in Asia and Europe. Japan's Nikkei stock average slid more than 2 percent on Monday, while the FTSEurofirst 300 index of top European shares fell 1.9 percent after a short-lived bounce following the European Central Bank's move to buy Spanish and Italian bonds.
Resource-related stocks will be under pressure as crude oil prices fell 3.6 percent on concerns over an economic slowdown in the United States, and as key base metals fell 0.9 to 1.6 percent.
(Reporting by Atul Prakash; Additional reporting by Ryan Vlastelica in New York; Editing by Will Waterman)