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Global Markets React to Possible U.S Debt Default
- By Williams Ekanem
- Published August 1st, 2011
- Washington File
- Unrated
As U.S. lawmakers find it difficult to agree on increasing the country’s debt and with days turning to hours to the August 2 deadline, global stocks headed for their biggest weekly loss in almost a year on Friday as investors piled into safe havens on worries about sovereign debt crises on both sides of the Atlantic and after data showed meager growth in the U.S. economy. Reports monitored from Washington D.C show that the Swiss franc, a traditional safe-haven currency, rose to record highs against both the dollar and the euro, and gold prices soared to a record high above $1,630.
According to the reports, adding to investor gloom, the government reported the U.S. economy grew at a meager 1.3 percent annual rate in the second quarter as consumer spending barely rose. The government also said the economy came perilously close to flat-lining in the first quarter, in a sharp downward revision from its previous estimate.
Stock markets pared some losses after President Barack Obama said he was confident a solution could be reached on the debt ceiling talks. Traders also cited talk of possible amendments to the Republican version of a U.S. debt deal, which could lead to an eventual agreement. “The U.S. debt talks will remain front and center going into the weekend, and the uncertain outcome will probably lead to more deleveraging today, especially after weak U.S. data and Moody’s decision to put Spanish debt on negative watch,” said Kathy Lien, director of currency research at GFT in New York.
Wall Street stocks fell more than 1 percent before sharply paring losses. The Dow Jones industrial average was down 38.56 points, or 0.32 percent, at 12,201.55. The Standard & Poor’s 500 Index was down 1.31 points, or 0.10 percent, at 1,299.36. The Nasdaq Composite Index was up 3.78 points, or 0.14 percent, at 2,770.03.
According to the reports, adding to investor gloom, the government reported the U.S. economy grew at a meager 1.3 percent annual rate in the second quarter as consumer spending barely rose. The government also said the economy came perilously close to flat-lining in the first quarter, in a sharp downward revision from its previous estimate.
Stock markets pared some losses after President Barack Obama said he was confident a solution could be reached on the debt ceiling talks. Traders also cited talk of possible amendments to the Republican version of a U.S. debt deal, which could lead to an eventual agreement. “The U.S. debt talks will remain front and center going into the weekend, and the uncertain outcome will probably lead to more deleveraging today, especially after weak U.S. data and Moody’s decision to put Spanish debt on negative watch,” said Kathy Lien, director of currency research at GFT in New York.
Wall Street stocks fell more than 1 percent before sharply paring losses. The Dow Jones industrial average was down 38.56 points, or 0.32 percent, at 12,201.55. The Standard & Poor’s 500 Index was down 1.31 points, or 0.10 percent, at 1,299.36. The Nasdaq Composite Index was up 3.78 points, or 0.14 percent, at 2,770.03.
