The dollar fell and global equity markets slumped on Monday as the impasse over the week-old U.S. government shutdown got entangled in negotiations to raise Washington’s borrowing limit or risk default on U.S. sovereign debt.
A lack of progress by U.S. lawmakers in budget and debt ceiling talks rattled investors, pulling stocks on Wall Street down and sending European shares to a four-month low. Republican House of Representatives Speaker John Boehner vowed not to raise the U.S. debt ceiling without a “serious conversation” about what is driving the debt, while Democrats said it was irresponsible and reckless to raise the possibility of a U.S. default.
The dollar fell, hovering near an eight-month low against a basket of major trading currencies, and crude oil prices slipped as the government shutdown and looming fight over the debt ceiling clouded the economic outlook.
Last weeks hopes that the crisis would be short lived have been thwarted and this is weighing on markets in general.To add to the gloom the Treasury has cited October 17 as the date when it will effectively run out of cash.This could have a knock on effect of fears of default persist but also the fear that this will cause the Federal Reserve to delay its monthly bond purchases.The outlook for now remains grim at best.