Markets steady as debt ceiling deadline looms

PAN PYLAS, Associated Press
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Trader Sean Spain works on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)

Trader Sean Spain works on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)

LONDON (AP) — Three days from a deadline to increase the U.S. debt ceiling, investors remain focused on developments in Washington. Most think a deal will be reached in time and stock markets were holding up Monday.

The U.S. has to increase the amount of debt it can carry by Oct. 17 or face a possible default on its debt, a scenario that could derail the U.S. economic recovery and roil international markets.

Negotiations between Republicans and Democrats over the weekend failed to reach a conclusion either on the raising of the debt ceiling or the partial shutdown of the U.S. government, which has now entered a third week.

Despite the possible nightmare scenario of a U.S. debt default, markets have proven more resilient than many analysts had expected.

“Like the fiscal cliff in 2012 and the last debt ceiling scare in 2011, the view remains that it will all work out, eventually,” said Michael Ingram, market strategist at BGC Partners. “They are probably right of course, but it still feels that equity markets have been approaching this issue with unusual complacency.”

In Europe, Germany’s DAX closed flat at 8,723.81 while the CAC-40 in France rose 0.1 percent to 4,222.96. The FTSE 100 index of leading British shares ended 0.3 percent higher at 6,507.65.

In the U.S., the Dow Jones industrial average was down 0.2 percent at 15,211 while the broader S&P 500 index fell the same rate to 1,700.

Despite the public holiday, developments in Washington remain the focus of attention in financial markets, with Senate leaders from both sides set for further discussions. Democratic Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell spoke by phone Sunday but failed to agree on a deal to raise the nation’s borrowing authority above the $16.7 trillion debt limit.

Earlier, trading in Asia was muted, with markets in Tokyo and Hong Kong closed for holidays.

Outside of those major financial centers, China’s Shanghai Composite Index rose 0.4 percent to 2,237.77 while South Korea’s Kospi was off 0.2 percent at 2,020.27. Australia’s S&P/ASX 200 shed 0.4 percent to 5,207.90.

Trading was also subdued in other financial markets. In currencies, the euro was up 0.2 percent at $1.3577 while the dollar was steady at 98.24 yen. In the oil markets, a price of benchmark New York crude was down 21 cents at $101.81 a barrel.


Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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