partlycloudy
Wednesday July 1st, 2015 1:01PM

Overseas markets mixed, US futures down following debt deal

By The Associated Press
LONDON (AP) -- A day after the U.S. Congress stepped back from the abyss and avoided a potentially disastrous default, investor relief was checked Thursday by concerns over the cost of Washington's drawn-out political battle.

Even though Congress has agreed to raise the $16.7 trillion debt ceiling and end a 16-day partial government shutdown, the relief rally that started on Wall Street on Wednesday has largely petered out. The dollar was down sharply and stock markets drifted lower.

Investors around the world, including fund managers holding dollars and Treasurys, have been unimpressed by the political squabbling that has threatened the U.S. since 2011. The question is whether the brinkmanship will become the new normal.

After all, the deal cobbled together at the eleventh hour is just a short-term fix. It permits the Treasury to borrow normally through Feb. 7 and fund the government through Jan. 15. It would be no surprise to see a repeat of the political standoff in 2014, leaving the U.S. once again facing the prospect of a catastrophic debt default.

Of more immediate concern is what effect the standoff has had on the U.S. economy, which had been showing signs of improvement, particularly in the labor market.

"The government remains the biggest wild card for end of the year growth," said Lindsey Piegza, chief economist at Sterne Agee, a privately-owned brokerage in New York. "A dysfunctional government is further undermining confidence and exacerbating cautious spending patterns."

The Federal Reserve had said during the summer it was considering reducing its monetary stimulus. Any such plans, however, have been put on hold due to the uncertainty over the government debt and because no economic indicators have been published during the shutdown.

In Europe, the FTSE 100 index of leading British shares was down 0.2 percent at 6,560 while Germany's DAX fell 0.6 percent to 8,795. The CAC-40 in France was 0.5 percent lower at 4,222.

In the U.S., Dow futures were down 0.4 percent while the broader S&P 500 futures fell 0.2 percent. Both indexes, however, had rallied hard the previous day, when a debt deal was announced in Washington.

In the longer-term, one fundamental impact of the U.S. debt crisis could be on the dollar's status as a reserve currency. Many in the markets think the fact that U.S. lawmakers took their issues to the wire has besmirched the country's credibility.

This week, Fitch warned it may strip the U.S. of its triple A credit rating. On Thursday, Dagong, a small Chinese rating agency, downgraded the U.S. to A- from A, arguing that the U.S. government is "still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future."

China's position is crucial as the country has bought up around $1.3 trillion worth of U.S. debt during its rapid economic expansion. Chinese officials have been voicing their worries over the U.S. fiscal position and the dominance of the dollar and U.S. Treasurys in international financial markets.

Martin Hennecke, chief economist at The Henley Group, an independent financial advisory firm in Hong Kong, said he would advise clients to stop holding Treasurys.

He noted the crisis may make some central banks, such as China's, more "nervous" about holding U.S. Treasurys and spur them to move faster into assets denominated in other currencies. However, he said they're also caught in a bind because their Treasury holdings are so big that they would be unable to sell without collapsing the market.

Concerns about international investors' reaction appeared weigh on the dollar. The euro was up 0.8 percent against the U.S. currency, at $1.328, while the dollar was 0.9 percent lower at 97.97 yen.

Earlier, Asian stocks fared better as they responded to the previous day's broad rallies in the U.S. and Europe.

Japan's Nikkei 225 rose 0.8 percent to 14,586.51 while Seoul's Kospi gained 0.3 percent to 2,040.61. Stock indexes in Australia, Taiwan and Southeast Asia also gained but Hong Kong's rally faded and the Hang Seng fell 0.6 percent at 23,094.88.
© Copyright 2015 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
S&P 500 index has its best year since 1997
The stock market closed out a record year with more all-time highs on Tuesday, giving U.S. indexes their biggest annual gains in almost two decades.
6:56PM ( 1 year ago )
Colorado readies for 'Green Wednesday' pot sales
Police were adding extra patrols around pot shops in eight Colorado towns that plan to allow recreational sales to anyone over 21 on Jan. 1.
1:52PM ( 1 year ago )
Kerry seeks framework for Mideast peace talks
A senior State Department official says Secretary of State John Kerry will try this week to get Israel and the Palestinians to agree on a framework for negotiating a final peace agreement, yet cautions against raising expectations for Kerry's latest round of shuttle diplomacy.
1:35PM ( 1 year ago )
U.S. News
Missing Ga. bank director arrested in Brunswick
A bank director accused of losing millions of investors' dollars before vanishing last year was arrested Tuesday during a traffic stop in a city in south Georgia.
7:00PM ( 1 year ago )
Amtrak to suspend some Crescent service in Jan., Feb.
Amtrak service will shut down in parts of the Southeast for several days in January and February for rail maintenance by Norfolk Southern Railway.
9:00AM ( 1 year ago )
Lung cancer scans urged for some smokers, not all
Certain current or former heavy smokers should start getting yearly scans for lung cancer to cut their risk of death from the nation's top cancer killer, government advisers said Monday - even as they stressed that the tests aren't for everyone.
7:26AM ( 1 year ago )
Business News
Sex offender held in Hall County for failing to register
A 47-year-old man was booked into the Hall County Jail Tuesday, being held without bond for allegedly failing to register as a sex offender, his second such arrest.
6:09PM ( 1 year ago )
Pharmacy robberies may involve same suspect
Oakwood Police Tuesday afternoon released details in a pharmacy robbery they're investigating, similar to one that happened in the Hall County Tuesday morning.
5:46PM ( 1 year ago )
Victim critical following apartment fire
A 41-year-old woman was in critical but stable condition Tuesday after being rescued from an apartment fire in Forsyth County late Monday afternoon.
3:16PM ( 1 year ago )
Local/State News
Feeling US snub, Saudis strengthen ties elsewhere
Increasingly vocal in its frustration over U.S. policies in the Mideast, Saudi Arabia is strengthening ties elsewhere, seeking out an alignment that will bolster its position after it was pushed to the sidelines this year.
4:34PM ( 1 year ago )
NSA reportedly intercepts computer deliveries
A German magazine has lifted the lid on the operations of the National Security Agency's hacker unit, revealing how American spies intercepted computer deliveries, exploited hardware vulnerabilities, and even hijacked Microsoft's bug report system to spy on their targets.
12:31PM ( 1 year ago )
Rockets fired from Lebanon into Israel
Rockets from Lebanon struck northern Israel on Sunday, causing no injuries but sparking an Israeli reprisal shelling in a rare flare-up between the two countries.
12:26PM ( 1 year ago )
Politics
The Latest: US, Cuba to open embassies, restore ties
WASHINGTON (AP) — The United States and Cuba will open embassies in their capital cities after more than 50 years of hostilities between the two countries. The latest developments (all times local):__...
12:21PM ( 40 minutes ago )
Episcopalians to vote on allowing gay marriage in churches
SALT LAKE CITY (AP) — Episcopalians were set to vote Wednesday on allowing religious weddings for gay couples, just days after the U.S. Supreme Court legalized same-sex marriage nationwide.In 2003, th...
11:47AM ( 1 hour ago )
US stocks open higher following gains in European markets
NEW YORK (AP) — U.S. stocks opened higher Wednesday on hopes that a deal between Greece and its creditors could be cobbled together to prevent a Greek exit from the euro. Stocks in Europe rose sharply...
10:20AM ( 2 hours ago )
Survey: US businesses step up hiring in June to 237,000
WASHINGTON (AP) — U.S. businesses added jobs at a robust pace in June, a private survey found, evidence that rising consumer spending and a healthy housing market are supporting more hiring.Payroll pr...
8:59AM ( 4 hours ago )
Christie promises blunt campaign as he enters 2016 contest
LIVINGSTON, N.J. (AP) — A tough-talking New Jersey Gov. Chris Christie launched his 2016 campaign for president Tuesday with a promise to tell voters the truth even if it makes them cringe.The Republi...
8:42PM ( 16 hours ago )