European shares extend falls on US stand-off
LONDON (AFP) - Europe's major stock markets slid further on Tuesday, as the US budget standoff entered its eighth day with no end in sight, stoking worries of a catastrophic default.
Meanwhile, the dollar stabilised against the euro and rose against the yen, while the price of gold climbed.
London's benchmark FTSE 100 index fell 1.11 percent to 6,365.83 points, Frankfurt's DAX 30 shed 0.42 percent to 8,555.89 points, while the CAC 40 in Paris dropped 0.77 percent to 4,133.53 points.
"Nervous investors are voting with their feet as the saga drags on," said Mike McCudden, head of derivatives at online stockbroker Interactive Investor.
Worries over raising the government debt ceiling drowned out angst over a week-long government shutdown in Washington.
Markets are awaiting some movement from lawmakers on Capitol Hill as an October 17 deadline approaches for raising the country's debt ceiling.
Failure to do so will mean the government will be unable to pay its bills or service its debts, causing a default that analysts have warned could send the world economy back into recession similar to that after the financial crisis.
"Another day of inaction in Washington," said Capital Spreads dealer Jonathan Sudaria.
"With such huge uncertainties in the market at the moment, no one has the confidence or nerve to place any sizable positions."
He said: "I still believe that no one in their right mind would allow the US to hit the debt ceiling, causing havoc in financial markets and risking sending a number of countries, including the US itself, back into recession."
Sudaria, echoing the view of many analysts in recent days, added: "A deal will surely be done in the end, which delays the debt ceiling being hit until the end of the year in exchange for some cuts to spending."
The US government will be barred from borrowing after October 17 unless the current $16.7 trillion debt ceiling is lifted.
US stocks also moved lower on Tuesday, with the Dow Jones Industrial Average sliding 0.55 percent to 14,854.23 points in midday trade.
The broad-based S&P 500 dropped 0.74 percent to 1,663.71, while the tech-rich Nasdaq Composite Index fell 1.48 percent to 3,714.40.
Stocks also took a hit from the IMF cutting its 2013 growth forecast by 0.3 percentage point to 2.9 percent and its 2014 forecast by 0.2 point to 3.6 percent.
Four years after the Great Recession ended, "global growth remains in low gear," the IMF said in its World Economic Outlook, and warned the outlook could get bleaker if the US political standoff over finances drags on.
Alcatel-Lucent, Vodafone in focus
In company news, shares in French telecom equipment maker Alcatel-Lucent fell 4.1 percent to 2.77 euros, after the group said it would cut 10,000 jobs, sell some assets and focus research on new technologies, in what one analyst described as a last-chance restructuring.
Shares in French television group TF1 climbed 3.1 percent to 13.73 euros on interest from US group Discovery Communications in acquiring all of the sports channel Eurosport.
In London, Vodafone shares rose 0.26 percent to 218.45 pence, as the Financial Times reported that the mobile phone giant wanted to increase its holding in its Indian unit.
The FT said that Vodafone was preparing to invest as much as $2.0 billion to buy out minority shareholders in its Indian business.
The paper added that Vodafone would file an application this month to Indian authorities to gain permission for the investment.
Vodafone declined to comment on the story when approached by AFP.
Asian equities had mostly risen earlier as investors fished for bargains after two days of losses.
Hong Kong rose 0.89 percent, Tokyo added 0.30 percent and Seoul was up 0.42 percent, but Sydney slipped 0.23 percent.
The Shanghai stock market meanwhile climbed 1.08 percent in the first session after a week-long Chinese holiday.
In foreign exchange activity, the European single currency edged down to $1.3578 from $1.3579 in New York late on Monday.
The dollar rose to 96.91 yen from 96.68 yen on Monday.
The British pound fell to 1.1842 euros and $1.6093.
On the London Bullion Market, the price of gold increased to $1,329.50 an ounce from $1,323.50 on Monday.
