With hundreds of thousands of U.S. government employees preparing for a mandatory holiday Tuesday, world markets have held relatively steady following news that the U.S. Congress was unable to avoid a shutdown of the American federal government.
However, while analysts claim the shutdown has likely hurt American credibility and potentially the domestic economy, both financiers and foreign governments remain much more concerned about the U.S.’s debt ceiling. It must be extended by a mid-October deadline in order to prevent the country from defaulting on its loans.
“The shutdown is a self-inflicted wound, but the debt ceiling issue will be a collective wound for everyone if that doesn’t get dealt with sensibly,” Benjamin Reilly, Dean of the Sir Walter Murdoch School of Public Policy and International Affairs at Australia’s Murdoch University, told TIME.
On Tuesday, as the U.S. dollar tumbled against myriad currencies, stocks across the globe remained relatively stable. It remains to be seen how stocks in China will react after banks closed on Tuesday due to the National Day holiday, but in Tokyo the Nikkei 225 remained buoyed by the news of a new sales tax, and bourses across European rallied after tumbling on Monday.
“There may be some short-term market moves … but markets are getting increasingly immune to nonsense out of Washington,” co-director of the Global Income Group at Eaton Vance in Boston Eric Stein told Reuters on Monday.