Traders work on the floor of the New York Stock Exchange yesterday.
PARIS: European stock markets mostly slid while the euro continued to rise against the dollar yesterday as the US government shutdown dragged on for a third day.
At close in Europe, London’s benchmark FTSE 100 index edged up 0.18 percent to 6,449.04 points, as traders shopped for bargains after sharp falls the day before.
But Frankfurt’s DAX 30 shed 0.37 percent to 8,597.91 points, while the CAC 40 in Paris fell 0.73 percent to 4,127.98 points.
Milan’s FTSE Mib index slid 0.44 percent in value, after rising Wednesday when a bid to topple Italy’s government fell apart.
Asian stock markets mostly closed higher but investors remained nervous over the budget gridlock in Washington, as US President Barack Obama warned markets that the crisis could trigger a catastrophic US debt default.
“As we enter the third day of the shutdown of the US government the various positions seem as inextricably entrenched as ever,” said CMC Markets analyst Michael Hewson.
US stocks fell sharply, with economic data adding to the gloom. The Dow Jones Industrial Average dropped 1.11 percent and the S&P 500 shed 1.18 percent and the tech-heavy Nasdaq lost 1.33 percent. While initial jobless claims were nearly steady last week, better than expected by analysts, the US services sector, the bulk of the economy, slowed sharply in September.
The Institute for Supply Management’s purchasing managers index tumbled to 54.4 percent from 58.6 percent in August.
Berenberg bank analyst Christian Schulz said the poor data “gives the first clear indication” fiscal uncertainty may be beginning to creep into US economic sentiment data. “The cost of political instability, which has dogged some of the eurozone crisis countries already this year, is now threatening to hurt the US recovery, too,” said Schulz.
The euro hit an eight-month high at $1.3646 after former Italian prime minister Silvio Berlusconi abandoned his bid to topple Enrico Letta’s government, in a humiliating climbdown that averted a political crisis.
The euro later stood at $1.3638, while the dollar dipped to 96.97 yen from 97.34 yen. Sterling fell to ¤1.1856 from ¤1.1948 on Wednesday, and slid to $1.6176 from $1.6223.
In commodity deals on the London Bullion Market, the price of gold rose to $1,319.50 an ounce, compared with $1,306.25 on Wednesday.
Despite the looming danger to the US and world economies, there was no sign that either Obama or his Republican foes were ready to give ground in their bruising battle.
“There’s one way out of this reckless and damaging Republican shutdown. Congress has to pass a budget that funds our government with no partisan strings attached,” Obama declared.
Traders are especially nervous as Republicans and Democrats have just over two weeks to strike a separate deal on raising the country’s debt ceiling and avoid default. The US Treasury warned yesterday taht a default would be catastrophic.
In Europe meanwhile, Markit’s final PMI for September offered fresh hope of the recovery gathering pace, coming in at 52.2 points, a 27-month high. In Paris, the price of shares in global tyremaker Michelin fell by 2.67 percent to ¤78.59, after falling on Wednesday in response to a cautious briefing to investors on the outlook for tyres in the mining sector.