Markets Cautious Ahead of Debt Ceiling Vote

Capitol Hill Debt Ceiling vote(Updated, 9:53 a.m.)
By CARLO PIOVANO


LONDON -- Stock markets traded cautiously on Wednesday ahead of a U.S. vote on raising the nation's borrowing limit temporarily.

The House is set to vote on a motion to increase the nation's $16.4 trillion borrowing ceiling for three months. Without congressional action, the Treasury sometime in late February or early March will not have enough money to pay all of its obligations, raising the risk of a first-ever default on the government's debts.

Analysts said markets have room for gains if U.S. lawmakers approve the ceiling increase, but warned that longer-term negotiations on the budget will be tough and may weigh on sentiment again.

"A vote is expected today and if it is passed, as expected, it should clear the very short term obstacles for risk appetite, although battles on automatic spending cuts and the budget itself are not so long away," said analysts at Credit Agricole CIB in a market commentary.

By midafternoon in Europe, stock indexes were lacking momentum. Britain's FTSE 100 was up 0.2 percent at 6,190.06 while Germany's DAX was flat at 7,697.93. France's CAC-40 lost 0.5 percent to 3,722.08.

Corporate earnings in Europe showed a mixed outlook. Consumer goods maker Unilever and pharmaceuticals company Novartis reported good gains, but industrial conglomerate Siemens and software maker SAP saw their earnings drop.

Wall Street, meanwhile, opened with little momentum. The Dow rose 0.4 percent to 13,765.04 while the broader S&P 500 was flat at 1,492.97.

Strong earnings reports from big companies such as IBM and DuPont had helped push the Dow to its eighth gain in nine sessions on Tuesday. The rise came despite a report showing sales of previously occupied homes dipped in December from November. The news wasn't as bad as it looked, however. Sales rose last year to 4.65 million, a 9.2 percent increase from the previous year and the most in five years.

Earlier in Asia, Japanese stocks reacted negatively for a second day to the central bank's plans for shoring up the economy.

The Nikkei 225 in Tokyo tumbled 2.1 percent to close at 10,486.99, a day after the Bank of Japan set its target inflation rate at 2 percent and said it would undertake open-ended asset purchases starting in 2014. Some analysts said investors were disappointed that the central bank didn't take more aggressive measures.

Francis Lun, managing director of Lyncean Holdings in Hong Kong, said the Bank of Japan's latest efforts won't reverse two decades of stagnant growth without addressing the country's budget deficit and public debt, which ballooned under years of efforts to stimulate the economy.

"They are not doing anything to address the problem. They are just using the same old methods, of printing money to sustain economic growth. If you use that too often, it will lose its efficacy," Lun said.

South Korea's Kospi shed 0.8 percent to 1,980.41. Hong Kong's Hang Seng fell 0.1 percent to 23,635.10. Australia's S&P/ASX 200 bucked the trend, rising 0.2 percent to 4,787.80.

Elsewhere, the benchmark oil contract for March delivery was down 22 cents to $96.46 per barrel in electronic trading on the New York Mercantile Exchange. The February contract, which expired Tuesday, rose 68 cents to close at $96.24 a barrel on the Nymex on Tuesday.

In currencies, the euro rose to $1.3335 from $1.3317 in New York on Tuesday. The dollar fell to 88.56 yen from 88.76 yen.

___

Pamela Sampson in Bangkok contributed to this report.

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dembaitnswitch

Brown shirts for everyone. Soon China will take over anyway, get your how to speak Mandarin CD now.

January 23 2013 at 1:44 PM Report abuse +1 rate up rate down Reply
justthe2ofus

I have lost ALL confidence in our Goverment ! .....DEMOCRATS AND REPUBLICANS !

January 23 2013 at 11:44 AM Report abuse +10 rate up rate down Reply
1 reply to justthe2ofus's comment
dembaitnswitch

R.I.P. We the people..........It's now "Them the government"

January 23 2013 at 12:51 PM Report abuse +3 rate up rate down Reply
bobbsafe

It looks like WALL Street not Main street is the place to be. This reminds me of irrational exhuberance during dot com boom. No matter what the news (and it isn't very pretty) the market either goes up "on hopes", up by "shrugging off the news" or simply up for no reason at all. One thing for sure - with Bernanky at the printing press - Wall Street is going up up and away these days.

January 23 2013 at 10:44 AM Report abuse rate up rate down Reply
ian

Really?

January 23 2013 at 9:00 AM Report abuse +4 rate up rate down Reply
fomoyearsocrapleft

stand your ground president boehner ,all of american is behing you ., make the muslim clown n dummycraps make a budget n go dollar for dollar in spending cuts or let them SHUT THE COUNTRY DOWN. ! ALL AMERICANS WANT TO "CUT THE SIZE OF GOVERNMENT"~~"CUT TAXES. !

January 23 2013 at 8:39 AM Report abuse -1 rate up rate down Reply