Investors on edge as U.S.debt deadline nears

Wed Oct 16, 2013 8:48am EDT
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By Marc Jones

LONDON (Reuters) - World stocks and the dollar marked time on Wednesday as cautious investors focused on hopes that U.S. politicians would strike a last-minute deal to prevent the country defaulting on its debt.

U.S. Senate aides said after a chaotic day of negotiations on Tuesday that an agreement to lift the government's $16.7 trillion borrowing limit was near, although final details still needed to be worked out.

With markets wary over the eventual outcome, the cost of insuring one-year U.S. debt against default using credit default swaps hit its highest in over two years.

But the outline of a deal was enough to keep other parts of the financial markets steady, with morning falls on Europe's blue-chip index, the Euro STOXX 50 .STOXX50E, limited to 0.3 percent a day after it hit a 2-1/2 year high. .EU

The dollar also held its ground against a basket of currencies .DXY and U.S. stock index futures signaled a higher start on Wall Street later, when lawmakers will begin the final push for a deal.

"The markets have been going sideways for a while now and they seem pretty hopeful that we will have this compromise deal and that is what is getting us through this," said HSBC G10 currency strategist Daragh Maher.

"I am as hopeful as anyone but we will have to wait and see, and that is exactly what the market is doing, waiting and seeing."

If Washington does not reach a deal by Thursday, the U.S. government will by law no longer be able to add to the national debt, and will have to rely on incoming revenue and about $30 billion in cash to pay the country's many obligations.   Continued...

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