Markets' patience wears thin
NEW YORK — After weeks during which Wall Street was quietly confident Washington wouldn’t let the country go into default, the weekend’s debt ceiling drama is injecting a note of nervousness into the markets — with traders less certain than ever that Washington will get the job done.
High-level administration officials wanted a deal to raise the $14.3 trillion borrowing limit in place by Sunday afternoon before markets opened for trading in Asia. But with little sign that a final deal, agreed to by both parties, was close to being nailed down, the White House braced for stock market turbulence.
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Earlier Monday, financial markets in Tokyo and Hong Kong were down slightly as well, both less than 1 percent.
For all the drama of the on-again, off-again debt talks in recent weeks, President Barack Obama and congressional leaders have been spared roller-coaster dips in the Dow that would put added pressure on them to cut a deal by the Aug. 2 deadline.
The race against the clock Sunday reminded many on Wall Street of the frenzied weekend meetings in 2008 to come up with a bailout plan to ensure that the collapse of Lehman Brothers would not destroy the global economy.
Ultimately, it took a massive 778-point drop in the Dow, the largest one-day decline ever, to force the House to approve the Wall Street bailout. Some fear it may take a similar market reaction to force Congress and the White House into a debt ceiling extension.
In the interim, Obama administration officials have begun discussions with Wall Street banks regarding what would happen to upcoming Treasury auctions if the debt ceiling is not raised, people familiar with the matter said. And the Federal Reserve has been in discussions regarding what it will do if there is not enough money in the federal government’s accounts on Aug. 3 to send out $20 billion in Social Security checks and other payments.
High-level administration officials wanted a deal to raise the $14.3 trillion borrowing limit in place by Sunday afternoon before markets opened for trading in Asia. But with little sign that a final deal, agreed to by both parties, was close to being nailed down, the White House braced for stock market turbulence.
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“We may have a few stressful days coming up — stressful for the markets of the world and the American people,” White House chief of staff Bill Daley said on CBS’s “Face the Nation.”
Market reaction early Monday was fairly muted, but showed signs investors are wary that a deal seems a long way off. The Dow Jones Industrial Average opened down more than 100 points on Monday morning — roughly 1 percent in early trading — while the Nasdaq and S&P 500 also fell by about the same amount. Earlier Monday, financial markets in Tokyo and Hong Kong were down slightly as well, both less than 1 percent.
For all the drama of the on-again, off-again debt talks in recent weeks, President Barack Obama and congressional leaders have been spared roller-coaster dips in the Dow that would put added pressure on them to cut a deal by the Aug. 2 deadline.
The race against the clock Sunday reminded many on Wall Street of the frenzied weekend meetings in 2008 to come up with a bailout plan to ensure that the collapse of Lehman Brothers would not destroy the global economy.
Ultimately, it took a massive 778-point drop in the Dow, the largest one-day decline ever, to force the House to approve the Wall Street bailout. Some fear it may take a similar market reaction to force Congress and the White House into a debt ceiling extension.
In the interim, Obama administration officials have begun discussions with Wall Street banks regarding what would happen to upcoming Treasury auctions if the debt ceiling is not raised, people familiar with the matter said. And the Federal Reserve has been in discussions regarding what it will do if there is not enough money in the federal government’s accounts on Aug. 3 to send out $20 billion in Social Security checks and other payments.
Read more: http://www.politico.com/news/stories/0711/59784.html#ixzz1T98OLlpT
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