BEIJING (AP) — Asian stock markets fell Monday after U.S. political leaders failed to reach a deal to raise Washington's debt limit that is crucial to avoiding an impending default.
Oil prices dived below $99 a barrel amid investor concern that the lack of a debt agreement could damage the world’s biggest economy and reduce demand for crude.
Investors were not reassured by Secretary of State Hillary Rodham Clinton’s assertion that America’s economy is sound despite its current woes and the deadlock over the national debt.
Speaking in Hong Kong, Clinton predicted a deal on the debt would be reached before the Aug. 2 deadline to avoid an unprecedented default. She said the partisan debate over the debt ceiling was a fact of life in American politics.
Japan’s Nikkei 225 was off 0.8 percent at 10,050.01 and China’s Shanghai Composite Index slid 2.8 percent to 2,694.08. Both countries are major investors in U.S. government debt. Hong Kong’s Hang Seng Index lost 0.8 percent to 22,266.83
Elsewhere, South Korea’s Kospi shed 1 percent to 2,150.48 and Australia’s S&P/ASX 200 dropped 1.6 percent to 4,530.40. Markets in Singapore, Taiwan and Indonesia also fell while India and Thailand managed small gains.
"The only thing you can be assured of over the coming hours and days is volatility as the political posturing continues in the U.S.," said Ben Potter, market strategist for IG Markets, in a report.
U.S. leaders had hoped to strike a deal Sunday to reassure investors. President Barack Obama has insisted on raising revenues, mainly through letting tax cuts for wealthier Americans expire, but Republicans want more spending cuts and have rejected higher taxes.
A default would mean the U.S. government could not pay all its bills starting next month, including interest and principal on Treasury bonds. That would cause shockwaves through the global economy and financial markets.
Many analysts expect U.S. leaders to reach a last-minute deal to raise the government’s $14.3 trillion borrowing limit before the Aug. 2 deadline.
But markets are watching anxiously for what tax or spending changes might be part of the settlement.
In China, railway shares fell after this weekend’s deadly bullet train crash in southeastern China. China South Locomotive and Rolling Stock Corp. declined 8.6 percent and China Railway Group was off 7 percent.
The dollar fell to 78.38 from 78.43 late Friday in New York. The euro was little changed at $1.4372.
Benchmark oil for September delivery was down 89 cents to $98.98 a barrel in electronic trading on the New York Mercantile Exchange. Crude rose 74 cents to settle at $99.87 on Friday.
In London, Brent crude slid 62 cents to $118.05 per barrel on the ICE Futures exchange.
