U.S. equities slumped on Monday due to there being no end in sight for the partial U.S. government shutdown.

By Kin Talk on Tuesday, October 8, 2013 with 0 comments

This and the debt-ceiling face-off kept investors anxious, extending losses for two weeks now.
On Monday, a White House spokesman said a short-term increase in the country's borrowing authority would be accepted to avoid a default. Moreover, an influential Senator was rumored to be discussing a plan to reduce federal spending and restructure the U.S. tax code.
The partial U.S. government shutdown is now in its second week, but investors still believe that Republicans and Democrats will come to an agreement on the budget and the debt ceiling. Nonetheless, market participants are also fearful of the danger that it may not occur.
Market participants feel it will get resolved, but the concern is that at the last minute it might not. The recent Federal Reserve decision not to taper was unexpected and has contributed to confusion among investors over the direction of the central bank.
The longer the partial shutdown goes on, the greater will be the economic damage. Additionally, tapering could very likely be put off once again for some time and this means more dollars will flood the global markets.

This has made America's biggest creditors increasingly worried. China and Japan are fearful that the political deadlock could badly affect their trillions of dollars of investments in U.S. Treasury bonds.

Category: Market Events

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