Washington impasse keeps markets in check
AP and AFPLONDON/HONG KONG--Uncertainty about how long the partial shutdown of the U.S. government will last kept investors on edge Friday though the prevailing view in markets is that Congress will be able to reach a deal to prevent the world's largest economy from defaulting on its debts.
October 5, 2013, 12:08 am TWN
Some 800,000 federal workers and scores of agencies were idled this week after a sharply divided U.S. Congress failed to agree on short-term funding for the government to pay its bills beyond Monday, when the fiscal year ended.
Markets initially took the passing of the deadline and the partial shutdown of nonessential government services in stride. But investor anxiety has gradually risen as the budget impasse between Republicans in the House of Representatives and the White House drags on.
Of more consequence for investors is the looming Oct. 17 deadline for the raising of the U.S. debt ceiling. If it's not raised, the U.S. could potentially default, a development that could derail the global economic recovery and strip the dollar of its status as the world's reserve currency. The International Monetary Fund and the U.S. Treasury have both warned of the potentially dire consequences.
“While history certainly indicates an accord will be reached on the government shutdown and that Republicans will subsequently vote to raise the debt limit ahead of October 17, it is difficult not to look at the events of this month ... and fail to feel a degree of concern about a government system that is obviously dysfunctional,” said Simon Derrick, a senior analyst at Bank of New York Mellon.
In Europe, trading was muted. The FTSE 100 index of leading British shares was up 0.1 percent at 6,458 while Germany's DAX rose the same rate to 8,604. The CAC-40 in France was 0.6-percent higher at 4,151.
Wall Street was poised for a steady opening, with Dow futures and the broader S&P 500 futures up 0.2 percent.
Traders around the world would under normal circumstances be preparing for the monthly U.S. nonfarm payrolls report, traditionally the most important economic release of the month. But because of the shutdown, it's been postponed.
Asian shares fell on Friday as a budget deadlock in Washington showed no signs of ending, with investors growing nervous that the stalemate could trigger a damaging debt default.