Spain and Italy hit with Fitch downgrades

US markets have given up early gains after credit rating agency Fitch downgraded the long-term ratings of both Italy and Spain.

Fitch, one of the three top rating agencies, is the latest to target the heavily-indebted Eurozone states, after Moody’s downgraded 14 Portuguese banks today.

Fitch cut Spain's credit ratings by two notches, just a few minutes after downgrading Italy, saying the intensification of the Eurozone debt crisis has had a negative impact in the entire region.

The ratings agency cut Spain's credit ratings to AA-minus from AA-plus. It kept a negative outlook on the new rating, in a sign more downgrades are possible in the next couple of years.

Risks to the fiscal consolidation of Spain have risen as prospects for the country's economic growth declined, Fitch said in a statement.

The news sent the Standard & Poor’s 500 index down one per cent and the Dow Jones industrial average down 0.4 per cent. The Nasdaq composite index fell 1.4 per cent.