Analysts cited heightened worries about a possible US debt default after ratings agency Fitch placed the country's AAA-ranked credit on "rating watch negative" amid the stalled talks on raising the US debt ceiling.
Clifford Bennett, chief economist at ACY Securities, warned the stakes are high in the event of a default. On Thursday US President Joe Biden expressed confidence about the talks, saying "there will be no default" and that talks with House Speaker Kevin McCarthy had been "productive." "While many will see this contraction as a warning sign that Europe's largest economy will drag the region lower, the optimists will also look at these figures as a sign that higher rates are cooling consumption which will ultimately drive inflation lower."