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Business

Markets stay calm as US government shuts down

Stock markets in Asia and Europe have shrugged off news of a US government shutdown caused by political gridlock in Washington. But the US dollar has weakened on hopes for more US stimulus in view of the budget crisis.

In early trading Tuesday, most European shares edged up slightly, rebounding from three-week lows in spite of the US budget crisis.

The eurozone's blue-chip Euro STOXX 50 index was up 0.5 percent amid gains at stock markets in Frankfurt, Germany, and Paris, France. Only London's benchmark FTSE 100 index dipped slightly by 0.06 percent.

On Monday night, the US Congress missed a deadline for an agreement on a new US budget, triggering the first US government shutdown in 17 years. Investors and analysts, however, remained optimistic that the standoff between Republicans and Democrats might eventually be resolved.

“The US shutdown is a central point for the markets, but as long as the hope for just a temporary shutdown exists, it will not be a strong burden for equities,” Christian Stocker, strategist with UniCredit told Reuters.

Unfazed

Asian stock market also appeared largely unfazed, closing mixed with slight gains in Tokyo and Seoul and a drop in Sydney.

However, the US dollar came under pressure against a basket of currencies, including the Japanese yen, the euro, the Indian rupee and the Australian dollar.

The US dollar weakened as investors expect the US Federal Reserve to stick longer than previously thought to its monetary stimulus program in view of the budget crisis.

In addition, worries for the greenback are mounting among investors about a possible US credit rating downgrade in mid-October. By that time, Congress needs to raise the country's debt ceiling, or else the US government will default on its obligations.

uhe/ipj (dpa, AFP, Reuters)