News / Economy

Global Markets Calm on First Day of US Government Shutdown

Global Markets Calm on First Day of US Government Shutdowni
X
October 01, 2013 10:56 PM
On Tuesday, financial markets, by and large, shrugged off the first U.S. government shutdown in 17 years. Analysts believe the shutdown is likely to be short-lived but others worry a prolonged stand-off could wreak havoc on the global economy. Mil Arcega has more.
On Tuesday, financial markets, by and large, shrugged off the first U.S. government shutdown in 17 years.  Analysts believe the shutdown is likely to be short-lived but others worry a prolonged stand-off could wreak havoc on the global economy. 

While the back and forth continued in Washington, “The House has made its position known very clearly," said Republican Speaker of the House John Boehner.

“Madame President, it is embarrassing," said Democratic Leader of the Senate Harry Reid.

Financial markets around the world watched from the sidelines, waiting for cooler heads to prevail.

“I think the market is convinced that a deal eventually will be reached but right now they are really in wait and see mode," said market strategist Mike Ingram.

If resolved quickly, many investors believe the economic impact of the government shutdown will be minimal.  Investment manager Patrick Armstrong says the danger lies in not knowing when.

“The longer it does drag on the more impact it will have, because it will have consequences on consumer confidence, the unemployment rate kicks up as you’ve got government workers who aren’t employed," he said. "And it will probably create a bit more uncertainty about the budget crisis that’s looming at the middle of this month as well."

He’s referring to the country’s $16.7 trillion debt.

Unless Congress reaches a deal on raising the debt limit this month, the U.S. Treasury says the country will run out of money to pay its debts.  

Economist Eric Chaney says the longer the political stand-off continues, the greater the risk that people who hold U.S. Treasury bonds  will not get paid.  
 
“If the government shutdown in the U.S. lasts more than a week, people will start to think that “Okay, the deadline for the debt ceiling, which is around the 17th of October is not going to be met,” he said. "In that case, the risk is a risk of default.  And I think in that case, we might have a very negative reaction."

If that happens, analysts say the dollar’s value will fall, interest rates will rise and the U.S. could see another credit downgrade.   

The prospect of a U.S. default is especially troubling in Asia, where stock prices were rising on manufacturing gains.  

South Korean TV newscasters voiced the concerns this way:

“If the United States federal government’s temporary shutdown is prolonged, not only America but the world’s economy could be affected negatively.”

Still, European stocks were mostly higher Tuesday.  

And on Wall Street - where stock prices have fallen in seven of the past eight sessions - investors took advantage of bargain prices, sending major indexes into positive territory.  

Analysts predict the trajectory will change the longer the U.S. budget crisis continues.

You May Like

China Investigates Former Powerful Security Chief

Former security chief and member of Politburo Standing Committee, Zhou Yongkang, under investigation for suspected 'serious disciplinary violation' More

India, US Look to Reset Ties During Kerry Visit

This week's talks will be first high level interaction between two countries since Prime Minister Narendra Modi took charge More

Video Young African Leadership Program Renamed to Honor Mandela

YALI program, launched by President Obama in 2010, aims to build skills in business, entrepreneurship, public management and civic leadership More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Vietnamese Staging Chinese Product Boycott After Oil Rig Spati
X
Reasey Poch
July 28, 2014 7:18 PM
China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video ESA Spacecraft to Land on a Comet

After a long flight through deep space, a European Space Agency probe is finally approaching its target -- a comet millions of kilometers away from earth. Scientists say the mission may lead to some startling discoveries about the origins of the water on earth. VOA’s George Putic has more.
Video

Video Young Africans Arrive in US for Leadership Program

President Barack Obama's Young African Leadership Initiative has brought hundreds of young Africans to the United States for a six-week program aimed at building their knowledge and skills in fields such as public administration and business. Out of the 50,000 young Africans who applied for the program, just one percent was accepted. VOA's Laurel Bowman caught up with some of those who made the cut and has this report.
Video

Video In Honduras, Amnesty Rumors Fuel US Migration Surges

False rumors in Central America are fueling the current surge of undocumented young people being apprehended at the U.S. border. The inaccurate claims suggest the U.S. will give amnesty to young migrants from the region. As VOA's Brian Padden reports from Honduras, these rumors trace back to President Obama's 2012 executive order to halt deportations for some young undocumented immigrants already living in the United States.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.