- US government deadlock continues
- German data released amid hung parliament
- Credit Suisse ups Continental European stocks to 12 per cent overweight
FTSE 100: -0.23%
CAC 40: -0.03%
FTSE MIB: 0.22%
IBEX 35: 0.04%
Stoxx 600: -0.05%
US debt ceiling fears continued to put a damper on markets with European equities little changed and at a four-week low on Tuesday morning.
The US government has until October 17th before it reaches its $16.7bn borrowing limit.
The Treasury has said it will exhaust measures to avoid hitting the debt ceiling, otherwise it will run out of cash to pay its bills at some point between October 22nd and October 31st.
President Barack Obama on Monday stood his ground, saying that he will not negotiate with Republicans over policy conditions tied to the budget including his healthcare bill 'Obamacare' and to raise the borrowing limit.
Majority Leader Harry Reid yesterday called for the Senate to consider a "clean" increase of the debt ceiling.
"The longer this goes on, the more we're going to see this uncertainty in the markets turn into negativity," said Craig Erlam, Market Analyst at Alpari.
"The closer we get to the October 17th deadline, the more investors will begin to question whether the US will actually do the right thing in the end. 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.
"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, although Obamacare will likely be spared."
The government is in its second week of a shutdown after leaders failed to agree on a budget bill by last Monday's deadline.
The deadlock has stalled the release of economic reports in the world's biggest economy.
Instead, investors will turn to the release of data in the Eurozone including the German trade balance and German factory orders.
The German reports will be released amid uncertainty over which party Chancellor Angela Merkel's Christian Democrats will form a coalition with in order to end a hung parliament.
Opposition party Social Democrats have signalled their readiness to join the conservative Christian Democrats while a top aide for Merkel has suggested a partnership with the Greens was a realistic possibility.
Telecom Italia, Alcatel-Lucent
Telecom Italia declined after S&P said it was likely to reduce its BBB-long-term rating, the lowest investment grade, to BB+ after concluding a review of the phone company by the end of next month.
Alcatel-Lucent gained following reports the company plans to cut 10,000 jobs.
TGS Nopec Geophysical dropped after saying sales for the full year will be between $810m and $870m, down from a previous forecast for a range between $920m and $1bn.
UK house builders Barratt Developments and Taylor Wimpey advanced after the house-price gauge from the Royal Institution of Chartered Surveyors rose in September to 54, the highest since June 2002, from 41 in August.
Panmure Gordon has raised its rating on Taylor Wimpey to 'hold' from 'sell'.
Strategists at Credit Suisse have upped the weighting of Continental European stocks in their model portfolio to 12% overweight from 7% earlier.
Other asset classes mixed
The euro fell 0.09% to the 1.3569 US dollar.
Brent crude futures increased $0.046 to $109.730.