European shares opened weaker for a third day, down 0.3% in early trade

The government shutdown and looming debt deadline in the United States kept the dollar pinned at an eight-month low on Friday and drove world shares towards a second week of losses.

With no clear progress in Washington, financial markets were facing up to the possibility the deadlock could extend to October 17, when the government will effectively run out of cash.

European shares opened weaker for a third day, down 0.3% in early trading after Asian markets were led lower by a near 1% drop on Tokyo’s Nikkei.

World stocks overall were down 0.15% on the day and head for a second weekly loss in a row of 0.7%, but analysts saw that as of minor significance considering their recent strength.

Instead, focus was mainly on the ailing dollar, which hovered at an eight-month low against a basket of major currencies following a 3.5% drop during the last three weeks of political wrangling.

House of Representatives Speaker John Boehner was quoted on Thursday as saying Washington will make sure it does not default on its debt, though compromises may be needed.

Hitting the debt ceiling could lead to an unprecedented US default, an outcome the market assumes is unthinkable.

“By far the biggest risk is October 17. If the debt ceiling is not raised beyond $17.6 trillion words like default are going to start rearing they head,” said Neil Williams, chief economist at fund manger Hermes.

“Is the world’s biggest economy really going to default on its debt when the wheels of the Fed’s printing presses are still turning? I highly doubt it.”

Source: Business Standard

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