Roiled by U.S. & Italian politics, safe-havens gain

Sun Sep 29, 2013 7:16pm EDT
 
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By Wayne Cole

SYDNEY (Reuters) - U.S. stock futures and the dollar came under pressure on Monday as a shutdown of the U.S. government seemed increasingly likely, though the euro had political troubles of its own as the Italian government teetered on the edge of collapse.

The result was a general rush to safe havens including the yen, Swiss franc and some sovereign debt. U.S. Treasuries also benefited from a view that the economic damage done by a government closure would be yet another reason for the Federal Reserve to keep interest rates low for longer.

"Weekend political dynamics in the U.S. and Italy are likely to keep markets on the defensive at the start of a busy week for data and policy events," wrote analysts at Barclays in a note.

The damage was clear in U.S. stock futures where the S&P 500 contract shed 0.8 percent, as did the E-MINI S&P. Asian stocks could follow that lead lower, though markets in the region are usually reluctant to be the first to react to U.S. and European events that happen over a weekend.

The air of risk aversion lifted the yen across the board. The dollar fell to 97.88 yen from 98.20 late in New York on Friday, while the euro sank to 131.98 yen from 132.78.

The euro also lost ground to the Swiss franc, hitting its lowest since early May at one point.

The losses came as Italian Prime Minister Enrico Letta said he would go before parliament on Wednesday for a confidence vote after ministers in Silvio Berlusconi's center-right party pulled out of his government at the weekend.

Letta said he wanted to avoid elections under the current widely criticized voting system which he said would produce more stalemate, but it was not clear if an alternative majority could be found.   Continued...

 
A visitor walks past logos at the Tokyo Stock Exchange in Tokyo June 13, 2013. REUTERS/Toru Hanai