Oct. 07--GLOBAL markets took another pounding today as international pressure grew on the US to resolve its political deadlock and avoid an unthinkable default by the world's biggest economy.
The lingering impasse between the White House and intransigent Republicans over Barack Obama's health reforms has dragged the US shutdown into a second week. But investors are growing increasingly anxious as the clock ticks down to October 17, when the US needs political approval to extend its $16.9 trillion (pounds sterling 10.5 billion) debt ceiling or default on its debts.
The sell-off began in Asia overnight as Japan's Nikkei slid 1.2 percent and Hong Kong's Hang Seng dipped 0.7 percent, hitting markets in Australia and India before spreading through European bourses. London's benchmark FTSE 100 fell 0.9 percent while major indices in France, Spain and Germany also registered losses of 1 percent or more.
China, which holds $1.3 trillion in US debt and is the nation's largest creditor, also intervened today. Vice finance minister Zhu Guangyao said talks had taken place between Washington and Beijing and that China was "naturally concerned about developments".
He said: "We ask that the US earnestly takes steps to resolve... the political issues around the debt ceiling and prevent a debt default to ensure safety of Chinese investments in the US and the global economic recovery. This is the United States' responsibility."
Andreas Dombret, a senior member of Germany's central bank, the Bundesbank, warned: "In view of its importance for the global economy, it is crucial that the United States solve the current fiscal uncertainties quickly."
CMC Markets analyst Michael Hewson said: "The positions are more polarised than ever. If we are going to get an agreement one side is going to have to climb down. I can't see that the President will climb down on Obamacare; it's been ratified and he stood for re-election on the back of it. Winston Churchill once said of the Americans eventually do the right thing when they've exhausted all other options. With this lot I'm not so sure."
Investors were also unnerved by the World Bank lowering growth forecasts for Asia, encouraging the flow of cash into safe havens such as the Japanese yen and Swiss franc.
(c)2013 London Evening Standard
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Distributed by MCT Information Services
Original headline: Markets slide as pressure mounts over US shutdown
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