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World markets react to US debt deal
World markets react to US debt deal

World markets react to US debt deal


Fin24/ Sapa - Oct 18th 2013, 08:41

Johannesburg - Markets across the world on Thursday gave a lukewarm reaction towards the US debt deal, due to fears that the scenario will repeat itself early next year. 

The agreement reached in Washington gives budget authority through January 15 and raises the debt limit only enough to keep government obligations paid through February 7.

London's FTSE index was down by 0.2% at midday, while Germany's Dax and the Cac 40 in France were both down by 0.6%.

In the Nordic region, the Stockholm bourse was down 0.35%, while in Helsinki the index was down 0.65%.

In Asia, the reaction was slightly more mixed. Japan's benchmark Nikkei 225 Stock Average gained 119.37 points, or 0.83%, to end at 14 586.51.

Hong Kong's Hang Seng Index dipped by 0.57% to close at 23 094.88 points, falling back from earlier gains, while Singapore's Straits Times Index rose by 0.40% to 3 186.62 points.

Experts said the cool reactions were unsurprising as markets had already priced in a temporary solution but were still concerned that no permanent deal had been reached.

"The market feels uneasy about the prospects of contending with the same game of political brinkmanship in Washington again early next year," said Ishaq Siddiqi, a market strategist at ETX Capital.

"It's more unwarranted uncertainty at a time when economic growth across the world is anaemic at best," he added.

Chinese state media also warned that the political wrangling over the debt ceiling suggested that US treasury bonds may no longer be safe investments.

"Investors, domestic or foreign, may be advised to make plan B, given a long-term solution to the US debt crisis is not yet in sight," said the official Xinhua news agency in a commentary.

But Simon O'Connor, spokesman for EU Economy Commissioner Olli Rehn, said the deal was "a victory for responsibility over brinkmanship."

"Clearly that is what we have seen, so we very much welcome the agreement that has been reached, which removes a serious large shadow which had come to hang over the global economy and indeed also the nascent recovery here in Europe."Fin24/ Sapa  

Read more about: united states | europe | debt agreement | asia

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