Markets drift as debt ceiling deadline looms

Published: Monday, Oct. 14 2013 12:00 a.m. MDT

A statue of George Washington looks over the entrance to the New York Stock Exchange August11, 2011.  (Stan Honda,Afp/Getty Images) A statue of George Washington looks over the entrance to the New York Stock Exchange August11, 2011. (Stan Honda,Afp/Getty Images)

LONDON — Three days from a deadline to increase the U.S. debt ceiling, investors were fidgety Monday and stocks drifted lower.

The U.S. has to increase the amount of debt it can build up by Oct. 17 or else face a possible default on its debt, a scenario that could derail the U.S. economic recovery and roil international markets.

Negotiations between Republicans and Democrats over the weekend failed to reach a conclusion either on the raising of the debt ceiling or the partial shutdown of the U.S. government, which has now entered a third week.

Despite the possible nightmare scenario of a U.S. debt default, markets have proven more resilient than many analysts thought.

"Clearly, despite being unsuccessful so far, the negotiations on Capitol Hill are providing some comfort for traders, who remain reluctant to heavily sell their positions," said Craig Erlam, market analyst at Alpari.

In Europe, Germany's DAX was down 0.2 percent at 8,706 while the CAC-40 in France was down the same rate at 8,707. The FTSE 100 index of leading British shares was actually trading higher, up 0.1 percent at 6,494.

Wall Street was heading for a lower opening, with both Dow futures and the broader S&P futures down 0.6 percent. Trading is expected to be light, though, with much of the U.S. on holiday for Columbus Day.

Despite the public holiday, Washington will remain the focus of attention in financial markets, with Senate leaders from both sides set for discussions.

Democratic Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell spoke by phone Sunday but failed to agree on a deal to raise the nation's borrowing authority above the $16.7 trillion debt limit.

Earlier, trading in Asia was muted, with markets in Tokyo and Hong Kong closed for holidays.

Outside of those major financial centers, China's Shanghai Composite Index rose 0.4 percent to 2,237.77 while South Korea's Kospi was off 0.2 percent at 2,020.27. Australia's S&P/ASX 200 shed 0.4 percent to 5,207.90.

Trading was also muted in other financial markets, particularly among currencies. The euro was flat at $1.360 while the dollar rose 0.1 percent to 98.25 yen. In the oil markets, a price of benchmark New York crude was down 69 cents at $101.33 a barrel.

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