World Shrugs Off U.S. Shutdown, But Braces For What’s Next

World markets can deal with the fact that Congress hasn't agreed on a budget, but it's the looming default crisis that has them spooked

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Jonathan Ernst / Reuters

U.S. Senate Majority Leader Harry Reid (D-NV) (C) departs with an aide and his security detail after talks with the Republican-controlled U.S. House of Representatives reached a final impasse during a late-night session at the U.S. Capitol in Washington, October 1, 2013

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.

(MORE: Shutdown: Obama and Republicans Trade Blame as Deadline Is Crossed)

“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.

MORE: Could the U.S Default? An Impossible Thought Rattles The Market

8 comments
jdtweet_
jdtweet_

@TIME @TIMEWorld its more hype than anything,mayb.its when the flag is upside down that mayb then 1 should worry.good time 2 clear/start new

dingpio
dingpio

@TIME @TIMEWorld US's politicians must behaviour more responsibly. US is a global actor, its domestic economic affairs affect other nation

saying_1
saying_1

@TIME @TIMEWorld as long as the GOP and tea party exist we will all ways need Government because of their discontent for people