US Debt Talks – US debt iand the collapse of talks aimed at reducing the staggering budget deficit and lingering worries over Europe’s financial crisis sent Asian stock markets mostly lower Tuesday.
Benchmark oil fell toward $96 per barrel. The euro and the yen dropped against the dollar, which tends to be a sought-after currency when markets are turbulent.
Japan’s Nikkei 225 index fell 0.4 percent to 8,313.48. Hong Kong’s Hang Seng shed 1 percent to 18,047.54 and Australia’s S&P/ASX 200 dropped 0.6 percent to 4,138.20. But South Korea’s Kospi index bucked the trend and rose 0.3 percent to 1,825.51.
Investor jitters intensified after a so-called supercommittee in Congress failed to reach a deal Monday to cut the U.S. federal budget deficit by $1.2 trillion over 10 years. While not entirely unexpected, the failure led to heavy selling on Wall Street.
The Dow Jones industrial average lost almost 250 points to finish down 2.1 percent at 11,547.31. The Standard & Poor’s 500 index dropped 1.9 percent to 1,192.98. The Nasdaq composite index declined 49.36, or 1.9 percent, to 2,523.14.
The deficit reduction impasse underscored doubts about Washington’s political will to make tough decisions and drew a rare rebuke from Japanese Finance Minister Jun Azumi.
“The Democrat and Republican lawmakers need to stand in the shoes of the public. The key to market stability lies in how the parties could compromise towards an agreement,” Azumi said at a news conference in Tokyo.
The impasse in Washington comes at a time of economic fragility in Europe, which is reeling from a spreading debt crisis and recession worries.
One European country after another has fallen into crisis because of debt. Wary of the ability of countries to pay back their loans, bond investors have insisted on higher returns on national bonds, pushing borrowing costs to dangerous levels.