U.S. stocks drop as government shutdown continues; Dow falls 0.90%

U.S. stocks dropped on Monday as a government shutdown entered a second week amid concerns the deadlock may carry over into upcoming debt-ceiling debates and up the likelihood of government defaults.

Even if a compromise is reached, fears the uncertainty alone may roil markets steered investors away from stocks on Monday.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.90%, the S&P 500 index fell 0.85%, while the Nasdaq Composite index fell 0.98%.

An ongoing impasse among U.S. lawmakers and the White House over terms needed to create a spending package and reopen the government sent investors avoiding Wall Street on Monday.

Markets were also growing increasingly worried that the deadlock will affect negotiations to raise the U.S. debt ceiling, which the U.S. Treasury Department has estimated will be reached by Oct. 17, after which the risk of default rises. 

Republican House Speaker John Boehner said Sunday the House will not support bills to fully reopen the government or increase the government debt ceiling unless the Obama administration agrees to talks aimed at reducing the deficit.

For his part, Treasury Secretary Jack Lew said the Congress was "playing with fire" and added the U.S. could default in over a week.

A U.S. default could roil markets and slow U.S. recovery by further eroding confidence in Washington's ability to craft economic policy.

Markets didn't plunge, however, as the Treasury can still fund the government for some time if Oct. 17 comes and goes with special measures, though the longer the impasses drags on ahead of that date the more volatile markets may grow.

Leading Dow Jones Industrial Average performers included AT&T, up 0.77%, Verizon, up 0.40%, and Intel, up 0.09%.

The Dow Jones Industrial Average's worst performers included Visa, down 2.17%,  American Express, down 1.79%, and Microsoft, down 1.68%.

European indices, meanwhile, finished largely lower.

After the close of European trade, the EURO STOXX 50 fell 0.29%, France's CAC 40 rose 0.03%, while Germany's DAX 30 fell 0.36%. Meanwhile, in the U.K. the FTSE 100 finished down 0.26%.

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Forex - USD/JPY drops on as U.S. default concerns brew

The dollar fell against the yen on Monday after a U.S. government shutdown entered a second week and amid fears the deadlock may affect Washington's ability to borrow and open the door to possible defaults.

In U.S. trading on Monday, USD/JPY was trading at 96.93, down 0.55%, up from a session low of 96.82 and off a high of 97.34.

The pair was likely to find support at 96.94, Thursday's low, and resistance at 98.72, Tuesday's high.

An ongoing impasse among U.S. lawmakers and the White House over terms needed to create a spending package and reopen the government sent investors avoiding the dollar on Monday.

Markets were also growing increasingly worried that the deadlock will affect negotiations to raise the U.S. debt ceiling, which the U.S. Treasury Department has estimated will be reached by Oct. 17, after which the risk of default rises. 

Republican House Speaker John Boehner said Sunday the House will not support bills to fully reopen the government or increase the government debt ceiling unless the Obama administration agrees to talks aimed at reducing the deficit.

A U.S. default could roil markets and slow U.S. recovery by further eroding confidence in Washington's ability to craft economic policy,

The yen, meanwhile, saw safe-haven demand in a session absent of U.S. economic indicators due to the government shutdown.

The yen was up against the pound and up against the euro, withGBP/JPY down 0.05% and trading at 155.95 and EUR/JPY trading down 0.40% at 131.58.

Earlier in the euro zone, data revealed that the economy grew by 0.3% in the second quarter, unchanged from a preliminary estimate and in line with forecasts.

A separate report showed that the Sentix index of euro zone investor confidence dropped to 6.1 in October from 6.5 in September as concerns over the political impasse in the U.S. hurt sentiment. 

Analysts had expected the index to rise to 10.6 this month.

On Tuesday in the euro zone, Germany is to release data on the trade balance and factory orders.

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U.S. stocks open sharply lower as shutdown weighs; Dow Jones down 1%

U.S. stocks opened sharply lower on Monday, as ongoing concerns over the consequences of the U.S. government shutdown and a potential U.S. default weighed broadly on market sentiment.

During early U.S. trade, the Dow Jones Industrial Average tumbled 1%, the S&P 500 index retreated 0.91%, while the Nasdaq Composite index slumped 0.80%.

Republican House Speaker John Boehner said Sunday the House will not support bills to fully reopen the government or increase the U.S. debt ceiling unless Democrats agree to talks about spending cuts.

The comments fuelled fears that the political deadlock in Washington will not be resolved by October 17, the date which the Treasury Department has estimated the U.S. could risk an unprecedented default.

In addition, delays in U.S. economic data releases looked likely to fuel uncertainty over whether the Federal Reserve will hold off on any move to roll back its USD85 billion a month asset purchase program.

The shutdown meant that Friday’s scheduled release of the U.S. nonfarm payrolls report for September was postponed and no new date was given for the release of the data.

In the tech sector, Apple shares climbed 0.82% even as rival Samsung Electronics said it wants President Barack Obama to give it the same right he gave the iPhone maker, which is the right to keep importing smartphones and tablets found to infringe the other's patents.

Separately, the SEC ended an investigation into Apple's overseas cash and tax practices without taking any action.

Adding to gains, BlackBerry surged 3.90% after Reuters reported last week that the smartphone maker is talking to Cisco, Google and SAP about selling all or parts of the company.

On the downside, private-equity firm Apollo Global Management LLC tumbled 0.99% as it was reportedly considering seeking approval to raise the limit on its next flagship fund after investors expressed interest in putting in as much as USD20 billion.

Elsewhere, Alcoa lost 1.01% after Morgan Stanley cut its rating on the aluminum producer to "equal weight" from "overweight."

Across the Atlantic, European stock markets were sharply lower. The EURO STOXX 50 retreated 0.71%, France’s CAC 40 declined 0.61%, Germany's DAX lost 0.83%, while Britain's FTSE 100 slid 0.73%.

During the Asian trading session, Hong Kong's Hang Seng Index shed 0.71%, while Japan’s Nikkei 225 Index tumbled 1.22%.

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Dollar weaker as U.S. political deadlock weighs

 

The dollar was broadly weaker against the other major currencies on Monday as the U.S. government shutdown entered a second week, fuelling fears over the risk of a possible U.S. debt default.

During European afternoon trade, the dollar fell to fresh five-week lows against the yen, with USD/JPY down 0.61% to 96.86.

Republican House Speaker John Boehner said Sunday the House will not support bills to fully reopen the government or increase the government borrowing limit unless the Obama administration agrees to talks aimed at reducing the deficit.

The comments fuelled fears that the political deadlock in Washington will not be resolved by October 17, the date which the Treasury Department has estimated the U.S. could risk an unprecedented default.

The euro pushed higher against the dollar, with EUR/USD rising 0.13% to 1.3572.

Data released on Monday showed that the euro zone economy grew by 0.3% in the second quarter, unchanged from a preliminary estimate and in line with forecasts.

A separate report showed that the Sentix index of euro zone investor confidence dropped to 6.1, from 6.5 in September as concerns over the political impasse in the U.S. hurt sentiment. Analysts had expected the index to rise to 10.6 this month.

The pound rose to session highs against the greenback, with GBP/USD advancing 0.49% to 1.6087.

The dollar re-approached 20-month lows against the Swiss franc, with USD/CHF falling 0.40% to 0.9036.

Elsewhere, the greenback pushed higher against its Australian, New Zealand and Canadian counterparts, with AUD/USD down 0.29% to 0.9404, NZD/USD losing 0.54% to trade at 0.8274 and USD/CAD climbing 0.31% to 1.0327.

The Canadian dollar touched session lows after official data showed that the number of building permits issued in Canada in August was down 21.1%, following an upwardly revised increase of 21.4% in July.

 Analysts had expected building permits to decline by 7%.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.20% to 80.08.

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