- US government shutdown enters second week
- World Bank cuts China growth forecast
- Coalition between Merkel and Greens realistic, says aide
FTSE 100: -0.87%
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FTSE MIB: -0.24%
IBEX 35: -0.76%
Stoxx 600: -0.88%
Concerns over the US government shutdown and debt ceiling talks dragged European stocks lower at midday on Monday.
Congress has failed to reach an agreement on the federal budget as lawmakers continued to butt heads over President Barack Obama's controversial healthcare bill and raising the debt ceiling.
The government, which came to a screeching halt after missing last Monday's budget deadline, has until October 17th before reaching its $16.7tn borrowing limit and running out of cash.
US House Speaker John Boehner has ruled out increasing the borrowing limit without setting preconditions, raising fears of a possible default and subsequent meltdown of global 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."
The House and Senate are not scheduled to be in session on Monday and no meetings are planned.
Planned talks between the US and European Union about a free trade agreement have been cancelled and US data has been postponed due to the shutdown.
World Bank cuts China forecast
The World Bank has cut its growth forecasts for China and the developing East Asia ahead of its annual meetings on October 11th to 13th.
The lender dropped its 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 government's 7.5% target, it would represent the slowest pace of expansion in 23 years.
The World Bank cut forecasts for developing countries in East Asia to 7.1% in 2013 and 7.2% in 2014, from its prior projections last April of 7.8% and 7.6%, respectively.
Merkel may join forces with Greens, says aide
German Chancellor Angela Merkel's Christian Democratic Union (CDI) party could form a coalition with the Green party, a source told Bloomberg.
A top aide to Merkel said a partnership between the two parties was realistic, possibly adding pressure on the opposition Social Democrats.
The CDU and the Bavarian Christian Socialists will hold talks with the leadership of the Greens on October 10th.
It comes after Merkel failed to score enough votes to win the September 22nd parliamentary elections.
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.
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.
Brent crude slides
Brent crude futures fell $1.071 to $108.300 per barrel on the ICE.
The euro rose 0.13% to the 1.3575 US dollar.