GLOBAL MARKETS-Stocks rise after U.S. shutdown; gold, bonds slump
(Updates prices, adds comment)
* Dollar slides to near 8-month low vs major currencies
* Impasse raises U.S. debt ceiling concern
* Gold, Treasuries fall as investors see U.S. shutdown as
By Wanfeng Zhou
NEW YORK, Oct 1 (Reuters) - Stock markets worldwide climbed
on Tuesday while safe-haven gold and Treasury bonds tumbled on
expectations that the first partial shutdown of the U.S.
government in 17 years would be temporary.
The dollar slipped to a near eight-month low against major
currencies on concern the shutdown would further delay the U.S.
Federal Reserve's plans to start scaling back its monetary
Congress missed a midnight deadline to agree on a spending
bill, resulting in up to 1 million workers being put on unpaid
leave. If Congress can agree on a new funding bill soon, the
shutdown would last days rather than weeks, with relatively
little impact on the world's largest economy.
"People expect this will be relatively short-term, with the
impact hopefully minimal, but the longer it goes on, the more
pressure Washington will face," said Robert Pavlik, chief market
strategist at Banyan Partners LLC in New York.
"If this lasts longer than a few days, you'll really start
to see volatility pick up."
MSCI's world equity index, which tracks
shares in 45 countries, rose 0.6 percent to 384.46.
The Dow Jones industrial average gained 52.22 points,
or 0.35 percent, at 15,181.89. The Standard & Poor's 500 Index
was up 11.70 points, or 0.70 percent, at 1,693.25. The
Nasdaq Composite Index was up 34.22 points, or 0.91
percent, at 3,805.70.
Shares plummeted on Monday as the deadline approached
without any apparent progress in breaking the stalemate.
However, some market participants viewed any pullback as a
buying opportunity, and Monday's deepest losses were trimmed.
"The market has taken this into account and while the big
question is how long this will last, it isn't as though we're
going to fall every day the shutdown continues," said Rex Macey,
chief investment officer at Wilmington Trust in Atlanta,
Europe's broad FTSEurofirst 300 index gained 0.6
percent to 1,254.88, extending a stellar performance in the
The political crisis fueled concerns about whether Congress
can meet a crucial mid-October deadline to raise the
government's $16.7 trillion debt ceiling. Some Republicans have
vowed to make that conditional on defunding President Barack
Obama's healthcare reforms, as they did with the spending bill.
"The real focus for markets is Oct. 17, when the debt
ceiling issue will come to the fore again," said Richard Lewis,
head of global equities at Fidelity Worldwide Investment.
"This is going to be much more important because a failure
to extend the debt ceiling would stop coupon payments on bonds,
creating a technical default that would cause a riot in bond
markets," he said.
The benchmark 10-year U.S. Treasury note fell 5/32, yielding
2.634 percent as traders reduced their safe-haven
bond holdings on expectations the standoff would be resolved
Gold slid below $1,300 per ounce to its lowest since early
August, unwinding much of the gain built up before the shutdown.
Spot gold fell to $1,295 an ounce from $1,326.94.
Fitch Ratings reiterated on Tuesday that a partial shutdown
of the U.S. government is not itself a trigger for downgrading
its AAA sovereign credit rating, but does undermine confidence
in the budget process and raises concerns over whether the debt
ceiling will be raised to meet U.S. financial obligations.
If the debt ceiling is not raised in time, Fitch said a
formal review of the AAA rating "with potentially negative
implications" would be triggered, even though it believes U.S.
Treasury securities will be honored in full and on time.
The dollar fell against a basket of six currencies
and was last down 0.1 percent at 80.128. It also slipped to a
1-1/2 year low against the safe-haven Swiss franc.
The euro rose to an 8-month high and last traded at $1.3531,
up 0.1 percent. The dollar traded at 98.11 yen,
down 0.1 percent.
The dollar pared most losses after the release of
stronger-than-expected U.S. manufacturing data. The sector last
month expanded at its fastest pace in almost 2-1/2 years, an
industry report showed, while firms added the most workers in 15
Another industry report, however, showed U.S. manufacturing
grew at its slowest clip in three months in September.
"We do not know how long this impasse in the U.S. will last.
If it persists, there is a chance it will hurt economic growth
and affect chances of Fed tapering," said Daragh Maher,
strategist at HSBC. "In the short term, it's better to avoid the
The release of the government's report on construction
spending in August, which had been scheduled for 10 a.m, was
delayed because of the shutdown. If no deal is reached by
Friday, the closely watched payroll report will also be delayed.
A report on private sector hiring in September by payrolls
processor Automatic Data Processing will be released on
Wednesday at 8:15 a.m. (1215 GMT).
Oil prices edged lower on concern that a shutdown of the
U.S. government will crimp demand, while easing tensions in
U.S.-Iran nuclear talks boosted prospects for an increase in
supply. Brent crude fell $1.26 to $107.11 a barrel. U.S.
crude lost 91 cents to $101.42.
(Additional reporting by Ryan Vlastelica and Richard Leong in
New York and Richard Hubbard in London; Editing by Nick
Zieminski and Dan Grebler)
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