Dollar, global shares fall as U.S. government shutdown looms

Mon Sep 30, 2013 6:54pm EDT
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By Herbert Lash

NEW YORK (Reuters) - Global stock markets fell and the dollar dropped against major currencies on Monday as a partial U.S. government shutdown neared reality, with passage of an 11th hour stop-gap spending bill seen as unlikely.

The Democrat-controlled U.S. Senate killed a proposal by the Republican-led House of Representatives to delay President Barack Obama's health care program for a year in return for temporary funding of the federal government beyond Monday.

The bill, which would run through November 15, was aimed at averting a government shutdown. It now goes back to the House, where Republicans will seek a one-year delay of the "individual mandate" as part of an emergency spending bill.

A prolonged shutdown could have a major impact on the U.S. economy and consumer confidence. As many as 1 million federal employees could face unpaid furloughs. But a shutdown is unlikely to affect the country's sovereign credit rating.

President Obama, saying he was not "resigned" to a shutdown, said he planned to talk to congressional leaders later, as well as on Tuesday and Wednesday, but held out no new offer of compromise on his signature health-care law.

Investors are accustomed to political battles in Washington resulting in a last-minute accord and voiced skepticism any shutdown would last for an extended period.

The CBOE's Volatility index , often called Wall Street's fear gauge, jumped to a September high of 17.49, before shedding some losses to trade at 16.60.

"I don't think there is 'panic' per se, although the VIX is near 17, which is higher than what we've been seeing for some time," said Randy Frederick, director of trading and derivatives at Charles Schwab & Co. in Austin, Texas.   Continued...

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