BackUS dollar gains, stocks dip as Washington talks drag on
Progress stalls on US debt, budget talks; dollar gains, but US stocks edge lower after weak debt auction
Premium
New York: Mixed signals from Washington on progress in the budget and debt talks left markets confused on Tuesday, boosting the dollar, but the US stocks slipped and an auction of short-term US treasury debt drew weak demand.
The US political standoff initially showed signs of giving way to a Senate deal to reopen federal agencies and prevent a damaging default on federal debt. The deadline to lift the US debt ceiling is 17 October.
Senate majority leader Harry Reid, a Democrat, and his Republican counterpart, Mitch McConnell, ended talks on Monday with Reid saying they had made “tremendous progress." But comments by House speaker John Boehner that no decision had been made deflated some of that optimism.
The uncertainty over the US debt ceiling caused the treasury’s weekly auctions of three- and six-month bills to draw below-average demand. The value of bids received over those accepted was the lowest since 2009, said Stone & McCarthy Research Associates analyst Cathy Guo.
Earlier, treasury rates on T-bill issues due in October to November had fallen to their lowest level in a week, although they remained elevated compared with three weeks ago.
“Clearly, this is going to go to the twelfth hour and possibly beyond," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.
“There is obviously a problem. The debt ceiling used to be raised like clockwork and clearly we can’t go through this multiple times a year. We need a long-term resolution to this process."
MSCI’s world equity index, which tracks shares in 45 countries, was up just 0.03%, though it remained close to a five-year high hit in September prior to the crisis in Washington.
The Dow Jones industrial average was down 53.43 points, or 0.35%, at 15,247.83. The Standard & Poor’s 500 Index was down 4.63 points, or 0.27%, at 1,705.51. The Nasdaq Composite Index was down 7.95 points, or 0.21%, at 3,807.32.
Shares of Citigroup Inc. fell in early trading after weaker-than-expected quarterly earnings, but subsequently rose 6 cents to trade at $49.66.
In Europe, the FTSEurofirst 300 was up 0.9%.
In the US treasury bill market, most US treasuries prices were narrowly lower. Rates on T-bill issues due in October to November fell to their lowest level in a week, although they remained at elevated levels compared with three weeks ago.
The one-month treasury bills due on 7 November are the most sensitive to efforts to raise the statutory $16.7 trillion borrowing limit. The benchmark 10-year US treasury note was down 12/32, the yield at 2.7258%.
Dollar Higher
The dollar rose to touch a one-month high against a basket of currencies, buoyed by the optimism over possible progress in Washington.
The dollar index was last up 0.4% at 80.608 and touched its highest since 18 September.
Gold, whose safe-haven appeal is usually burnished during times of uncertainty, was down slightly after an early drop to three-month lows tempted some buyers back to the market.
Spot gold plunged to its lowest since 10 July at $1,251.66, but recovered to $1,271.21, down 0.1%.
Oil prices were lower after Iran presented a proposal over its nuclear programme at talks in Geneva. Brent was traded 81 cents lower at $110.23 a barrel. US oil was down 74 cents at $101.68.
Europe Recovery
The euro was down 0.6% on the day and last traded at $1.3483 after touching a two-week low of $1.3478.
In Europe, an unexpected rise in German analyst and investor sentiment lifted the outlook for the region’s largest economy.
The influential ZEW Institute’s monthly poll of economic sentiment rose to its highest level since April 2010 and beat a Reuters poll forecast for no change.
A separate report on price pressures in Britain showed inflation was higher than expected in September and house prices had risen sharply, adding to doubts over how long the central bank can hold down interest rates. Reuters
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
