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Asia markets rally, Europe down on U.S. uncertainty

Published: Tuesday, Oct. 8 2013 7:02 a.m. MDT

A man watches an electronic stock indicator in Tokyo, Thursday, Aug. 29, 2013.  (Shizuo Kambayashi, Associated Press) A man watches an electronic stock indicator in Tokyo, Thursday, Aug. 29, 2013. (Shizuo Kambayashi, Associated Press)

MUMBAI, India — Asian markets recovered on Tuesday as investors hunted for bargains in stocks and apparently regained optimism that the U.S. political standoff will be resolved before next week's deadline that could force the country into defaulting on its debts.

European stocks were weighed down for a second day as uncertainty in Washington loomed.

Japan's Nikkei index closed up 0.3 percent to 13,894.61, while Hong Kong's Hang Seng index rose 0.9 percent to 23,178.85. China's Shanghai composite, reopening for the first time since closing for public holidays on Oct. 1, climbed 1.1 percent to 2,198.20. South Korea's Kospi index started the day in negative territory but by afternoon had joined the Asian rally, up 0.4 percent to 2,002.76.

Traders recently have become nervous about the standoff in Washington, particularly over the debt ceiling. The U.S. has to raise its debt ceiling by Oct. 17. If it doesn't, the world's largest economy faces the possibility of defaulting on its debts, a move that would send shockwaves around global markets.

The uncertainty weighed on global markets at the start of the week. The Dow Jones industrial average fell 0.9 percent to close at 14,936.24 on Monday. The S&P 500 0.9 percent, to 1,676.12. The Nasdaq composite dropped 1 percent to 3,770.38.

On Tuesday, traders in Asian markets seemed to have either regained optimism that a deal can be struck — despite little evidence of progress — or were simply hunting for bargains, said Ric Spooner, chief analyst at CMC Markets.

In Europe, traders remained gloomy, with Germany's DAX index inching down 0.2 percent to 8,572.61 in early trading while the FTSE index of major British stocks dropped by 0.6 percent to 6,400.39. France's CAC 40 fell by 0.4 percent to 4,147.55.

Market volatility is likely to remain as long as the partial U.S. government shutdown and debt ceiling showdown continue.

"I think the events in Washington will be the main driver," Spooner said. "It'll be a day-by-day situation."

Though most analysts think a deal to avoid default will be agreed on in time, investors are fidgety — uncertainty discourages investors from buying into risky assets, such as stocks. On Sunday, Republican House of Representatives Speaker John Boehner ruled out a vote on a straightforward bill to raise the government's borrowing authority without concessions from President Barack Obama before the deadline.

In currencies, the euro slipped to $1.3563 from $1.3575 in late trading Monday. The dollar rose to 97.14 yen from 96.67 yen.

Benchmark oil for November delivery rose 5 cents to $103.09 a barrel in electronic trading on the New York Mercantile Exchange.

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