Stocks hold steady despite Washington closure
AP and AFPLONDON/HONG KONG--World stock markets held their nerve Tuesday despite the fact that the U.S. government was forced to partially shut down after Congress failed to approve a funding agreement.
October 2, 2013, 12:09 am TWN
The shutdown affects hundreds of thousands of federal workers and scores of agencies and operations. But some critical parts of the government, from the military to air traffic controllers, will remain open, and analysts said significant damage to the economy was unlikely unless the shutdown lasted more than a few days.
“Markets have become more and more rational over the last 24 months, particularly when they've seen central banks ... all working very closely together to make sure their economies are supported,” said Evan Lucas, market analyst at IG in Melbourne, Australia.
After falling the day before the U.S. shutdown deadline, European stocks mostly recovered.
Germany's DAX advanced 0.5 percent to 8,639.61 while France's CAC-40 rose 0.7 percent to 4,170.83. They were supported by figures showing unemployment across the eurozone stabilized in August, a further sign of economic recovery. Britain's FTSE 100 fell 0.4 percent to 6,439.86.
Wall Street was also expected to open slightly higher, with Dow and S&P 500 futures up 0.2 percent.
The U.S. closure will see about 800,000 federal staff told to stay at home, leading to the closure of numerous agencies in the first shutdown since 1996. President Barack Obama warned it will hit a nascent recovery in the world's biggest economy.
Obama accused Republicans of holding America to ransom with their “extreme” political demands for his flagship healthcare law to be delayed for a year before they give the go-ahead to any budget.
Tracey Warren of CMC Markets Stockbroking told Dow Jones Newswires: “A prolonged shutdown could have a major impact on confidence and on the U.S. economy, and will likely see a delay in the release of (U.S.) employment figures.”
Adding to the sense of crisis, the two sides appear unlikely to reach a deal to lift the US borrowing limit by mid-October, when the government runs out of cash. This would leave it unable to service its debts and in turn possibly default.
However, Song Seng Wun, a regional economist with Malaysian bank CIMB, told AFP: “Asian markets are trying to see beyond what is an obvious case of politics coming in the way of common sense.”
He said markets expect that the shutdown “would likely be temporary.”
Asian markets were mixed Tuesday after political gridlock in Washington triggered the first US government shutdown in 17 years, while upbeat regional economic data provided some cheer.
Tokyo gained 0.20 percent, or 28.92 points, to 14,484.72 and Seoul added 0.10 percent, or 1.91 points, to 1,998.87 but Sydney fell 0.23 percent, or 12.1 points, to 5,206.8.
Hong Kong and Shanghai were closed for a public holiday.