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World markets on US debt watch

Tuesday, October 15, 2013 - 01:41

Oct 16 - World stocks mark time as nervy investors cling to hopes that U.S. politicians will prevent the country defaulting on its debt. But as David Pollard reports from London, a warning from ratings agency Fitch of a possible US credit ratings cut hasn't helped those watching from afar.

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Wary, worried - but not panicking. Yet. European investors appear to be taking the countdown to Thursday's default deadline in their stride, for now. Credit default swaps - effectively an insurance payment against default - are at two year highs. But - and despite ratings agency Fitch saying a US downgrade is possible - other asset classes have not seen the dips many expected. Analyst Brenda Kelly of IG Markets. (SOUNDBITE) (English) Brenda Kelly, markets analyst, IG Markets, saying: "There's a lot of complacency in the market at the moment, and I think it's a lot to do with the fact that people have been expecting some sort of resolution and have been a bit fearful to either be coming out and reducing their positions, or indeed, be caught short ." Default news if and when it happens could have a dramatic impact. That prospect is laced with the ingredient investors traditionally hate: uncertainty. Mike Ingram of BGC Partners. (SOUNDBITE) (English) Mike Ingram, markets analyst, BGC Partners, saying: "I understand that central banks and governments have been making contingency plans to try and mitigate the effects of a technical default, but as I said, we are really in unknown territory here. This really hasn't happened before in the US in living memory." Whatever resolution comes out of this week's horse-trading in Washington, it's not likely to offer any lasting answer to the problem either. SOUNDBITE) (English) Mike Ingram, markets analyst, BGC Partners, saying: "Never forget as well, even if there is a resolution - and by definition now it's going to be a last-minute resolution on this whole debt ceiling issue - it's almost certainly just going to be a short-term fix." Even if a deal is done the US could still become locked in its debt row again in January and February. And that raises the promise of a return to the thing investors - particularly those in struggling parts of Europe - had hoped was banished. Recession.

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World markets on US debt watch

Tuesday, October 15, 2013 - 01:41