Updated: 10/07/2013 6:34 AM
Created: 10/07/2013 6:29 AM KSTP.com
By: Maricella Miranda
Stocks took a pounding Monday as the partial shutdown of the U.S. government entered a seventh day and lawmakers appeared to be making little headway in raising the country's debt ceiling.
The U.S. has to raise its debt ceiling by Oct. 17. If it doesn't, the world's largest economy faces the possibility of defaulting on its debts, a move that would send shockwaves around the global economy and financial markets.
Though most analysts think a deal between Republicans in Congress and the White House to avoid default will be cobbled together in time, investors are fidgety - uncertainty discourages investors from buying into risky assets, such as stocks.
On Sunday, Republican House of Representatives Speaker John Boehner ruled out a vote on a straightforward bill to raise the government's borrowing authority without concessions from President Barack Obama before the deadline.
"As the partial shutdown of the U.S. government enters week two, there is little sign that the fiscal stalemate in Washington is being broken," said Neil MacKinnon, global macro strategist at VTB Capital. "Investors are on the sidelines until there is greater clarity or a last-minute resolution between the White House and the Republicans ahead of the debt ceiling deadline."
In Europe, the FTSE 100 index of leading British shares was down 0.9 percent at 6,393, while Germany's DAX fell 1.1 percent to 8.528. The CAC-40 in France was 1 percent lower at 4,124.
Wall Street was poised for further falls at the open with Dow futures and the broader S&P 500 futures down 0.9 percent.
The focus of attention in financial markets will likely remain on developments in the U.S. capital. Any comments from leading Republicans, such as Boehner, and President Barack Obama, could potentially be big market-moving events.
The dollar has also been on the defensive amid the budget fallout. It was struggling again Monday, with the euro up 0.1 percent at $1.3577 and the dollar 0.4 percent lower at 96.89 yen. Oil prices have drifted lower, and the benchmark New York crude rate was down another $1.20 at $102.64 a barrel.
Earlier in Asia, Japan's Nikkei index tumbled by 1.2 percent to close at 13,853.32. Hong Kong's Hang Seng index dipped 0.7 percent to 22,973.95. Trading was nearly flat on South Korea's Kospi, which fell 0.1 percent to 1,994.42. China's markets were closed Monday for a public holiday.
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