- US government no closer to budget deal
- Greece to post budget surplus
- German parties bid for coalition with Merkel
- World Bank cuts China growth forecast
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European equities were mixed as US lawmakers continued to hold back on a decision to avoid hitting the debt ceiling.
Congress has until October 17th before reaching its $16.7trn borrowing limit and facing a possible default.
The government has entered its second week of a shutdown after failing to reach an agreement on a budget bill by last Monday's deadline.
Republicans and Democrats have been at loggerheads over President Barack Obama's controversial healthcare bill and raising the debt ceiling.
US House Speaker John Boehner has ruled out increasing the borrowing limit without first setting preconditions, raising fears of a possible default and subsequent meltdown of global financial asset prices.
"If, that scenario was to play out, we are potentially looking at credit rating downgrades galore for the US, a huge flight out of US assets [dollar, equities, bonds] and holders of large amounts of US debt [such as China] taking a massive hit," according to Ishaq Siddiqi, Market Strategist at ETX Capital.
"On top of that, US economic recovery at the risk of being derailed; 800,000 federal workers still on unpaid leave and a huge number more expected if an agreement by lawmakers is not reached; businesses also stand to take a significant hit."
Free trade agreement talks between the US and European Union have been cancelled due to the shutdown, along with multiple US economic data releases.
Greece to post budget surplus
Greece's primary budget surplus will rise to €2.8bn in 2014 or 1.6% of gross domestic product (GDP) after a surplus of €340m this year, according to a draft 2014 budget.
Alternate Finance Minister Christos Staikouras said the overall deficit will be 2.4% of GDP this year and next.
The budget was submitted to parliament today and comes after the nation was handed €240bn from the euro-area and International Monetary Fund to help eliminate the primary deficit this year.
In Germany, a top aide to Chancellor Angela Merkel said her Christian Democratic Union (CDI) party could form a coalition with the Green party, according to Bloomberg.
Social Democrats have also signalled their readiness to join Merkel's conservative party.
The CDU and the Bavarian Christian Socialists will hold talks with the leadership of the Greens on October 10th.
It comes two weeks after Merkel failed to win a majority vote in the federal election to secure leadership of Europe's biggest lender.
Meanwhile, the World Bank has cut its growth forecasts for China to 7.5% this year and 7.7% next year from its prior estimates of 8.3% and 8%, respectively.
While it will meet the Chinese government's 7.5% target, it would represent the slowest pace of expansion in 23 years.
Marks & Spencer fell after Credit Suisse estimated that the UK retailer's same-store sales dropped 1.5% in the second quarter of its financial year.
Burberry Group declined after the luxury-goods maker's Chief Executive Officer Angela Ahrendts said a slowdown in Chinese sales may extend.
SAP slid after Reuters reported that the enterprise-software company, along with Cisco Systems and Google, have held talks to buy all or part of BlackBerry.
European Aeronautic Defence & Space Co. advanced after its subsidiary Airbus SAS won its first order from Japan Airlines Co.
Solvay rose after saying it will buy US chemicals maker Chemlogics Group for $1.35bn.
German utilities EON SE and RWE AG rallied following reports the European Commission has proposed scaling back a fixed-price guarantee for renewable energy.
Singapore´s sovereign wealth fund Temasek and Chinese outfit Sinopec are reportedly interested in acquiring a 25% stake in Gas Natural Fenosa, Spanish business daily Expansión reported.
Other asset classes edge higher
Brent crude futures increased $0.082 to $109.550 per barrel on the ICE.
The euro rose 0.09% to the 1.3570 US dollar.