Global Markets Nervous as U.S. Lawmakers Fiddle with Budget, Debt Talks

Nichole Harper
30 Sep, 2013
New York City

U.S. market indexes weakened as the government shutdown looms and reticent lawmakers are in no mood to agree on a short term budget. However, larger battle is ahead to revise debt ceiling in the next two weeks. U.S. Treasury yield was stable but the dollar weakened.

[R]2:30 PM New York – U.S. market indexes weakened as the government shutdown looms and reticent lawmakers are in no mood to agree on a short term budget. However, larger battle is ahead to revise debt ceiling in the next two weeks. U.S. Treasury yield was stable but the dollar weakened.[/R]

U.S. stocks were under pressure as investors began factoring government shutdown midnight.

Market indexes opened lower and widely followed S&P 500 index and Nasdaq Composite index declined more than 1%. However by late afternoon market indexes trimmed most of the losses.

Talks in Washington shifted to which party to blame as the U.S. government shutdown of non-essentially services increased.

In addition, investors worried that a bigger battle among lawmakers may force the U.S. to default on its obligation of debt ceiling is not revised in the next two weeks.

More than 800,000 federal workers are likely to ask to stay home and the impact of the government shutdown is expected to be limited if it lasts less than a week.

S&P 500 index declined 0.5% to 1,683 and the Nasdaq Composite Index fell 0.2% to 3,773.

U.S. Treasury yield on 10-year bond traded at 2.62% and on 30year bond hovered near 3.68%.

The government shutdown may force delay in economic data release later in the week. Labor Department is scheduled to release monthly unemployment survey data and the Commerce Department is scheduled to release construction spending and factory orders.

Markets in Europe were also on the edge after the coalition government faces its first challenge later this week.

Five ministers in a coalition government controlled by Enrico Letta resigned. The ministers of the former Prime Minister Silvio Berlusconi controlled party left to protest the policy implementation that favors higher taxes and smaller government spending that meets the EU guidelines.

FTSE 100 index fell 0.8% to 6,462, the DAX index declined 0.8% to 8,594 and the CAC 40 index dropped 1%.

U.S. Stocks in Review

Brookfield Property Partners L.P. ((BPY)) gained 1.1% or 21 cents to $19.55 after the real estate developer intends to acquire Brookfield Office Properties Inc. ((BPO)) through a tender offer for $19.34 per common share in cash for total consideration of $1.7 billion.

Lockheed Martin Corporation ((LMT)) slid 0.9% or $1.20 to $128.04 after the security and aerospace company secured two contracts worth $7.8 billion for 71 additional F-35 fighter aircrafts from U.S. Department of Defense.

Philip Morris International Inc. ((PM)) fell 0.4% or 32 cents to $87.01 after the tobacco products maker agreed to acquire 49% interest in Arab Investors-TA for $625 million.