Wall Street equities fell about 1 percent at the start of trading on Monday on the lack of progress American political leaders were making on a deal to raise Washington’s debt limit and avoid a default.
With concerns easing over Europe’s debt crisis after last week’s bailout package for Greece, investors focused on whether the White House and Congressional Republicans could raise the debt ceiling by the Aug. 2 deadline. A default would mean the United States government could not pay all its bills starting next month, including interest and principal on Treasury bonds.
By midmorning, the Dow Jones industrial average had recovered somewhat and was down 66.38 points, or 0.52 percent, to 12,614.78. The Standard Poor’s 500-stock index lost 0.49 percent to 1,338.43 and the Nasdaq dropped 12.68 points, or 0.44 percent, to 2,846.15.
Though many investors thought a last-minute deal to raise the $14.3 trillion borrowing limit would eventually emerge, the failure to come to a deal could leave a lasting effect on investor sentiment. A big worry in the markets was that only a short-term deal would be reached, with a promise to revisit the issue later. The problem is that next year is an election year.
“Common sense decrees that some kind of an increase is likely at the 12th hour, but as with the Europeans, the inability to act more quickly and more decisively is confidence-sapping,” said Kit Juckes, an analyst at SG Securities.
In Europe, the FTSE 100 index of leading British shares was down 0.19 percent, at 5,923.71 points, while the DAX in Germany was up 0.17 percent to 7,338.73 points. The CAC 40 in France was off 0.42 percent, at 3,826.41 points.
The dollar has been drifting downward as the negotiations have dragged on, but it has not come under sustained selling pressure. By late morning, it was trading 0.1 percent higher against the euro, at $1.4335.
Analysts said that could change, though, if the debt impasse lasts longer.
Greece was expected to be placed temporarily in default of its debts as part of the rescue deal agreed to by European leaders last week. Moody’s Investors Service, which downgraded Greek debt again on Monday, said a Greek default was almost 100 percent certain because it would involve private creditors, but markets had anticipated as much for weeks.
Earlier in Asia, the Nikkei 225 in Japan closed down 0.8 percent, at 10,050.01 points, while Hang Seng index in Hong Kong lost 0.7 percent, to 22,293.29.
The Shanghai composite index slid 3 percent, to 2,688.75 points. That was its biggest one-day loss in six months, as railroad-related shares plunged after a high-speed train crash this weekend killed 38 people, raising doubts about the rapid expansion of the rail network.
Oil was trading around the $100 a barrel mark. Oil for September delivery was down 44 cents, at $99.43 a barrel, in electronic trading on the New York Mercantile Exchange.
Article source: http://feeds.nytimes.com/click.phdo?i=82b7bb2570c75227796fefb9ecd7dec0
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