U.S. Debt Deal Doesn't Bring 'Sigh of Relief' Rally in International Markets
After weeks of uncertainty, a U.S. debt ceiling agreement was reached on Sunday evening which may be just in time to avert an unprecedented default of the world's largest economy. As a result of the deal, markets opened up all over the world on Monday with a huge sigh of relief.
However, the relief rally everyone was looking forward to was short-lived.
Early on Monday, Germany's DAX increased 0.7 percent but fell again 1.9 percent. The U.S. Dow Jones was down 1.02 percent and Britain's FTSE 100 index of leading shares also rose 1.3 percent but then went down 0.2 percent.
China's Shanghai index rose only 0.1 precent, while China's purchasing manager's index fell to its lowest level in 16 months.
The price of gold, having hit an all time high last week, declined around 10 dollars to $1,613 an ounce.
With a debt deal in line, a sense of less risk-aversion spread among investors early on Monday but receded back with fears over the challenges of the U.S. economy persisting.
Also, although the debt deal is made, it still needs to be approved by Congress.
The U.S. debt has risen to an astounding $14.3 trillion in recent years and the deal made on Sunday would result in spending cuts over the next decade rounding to about $900 billion.
Last week the U.S. released a manufacturing data report that indicated the depth of the current recession. The report highlighted that the U.S. national G.D.P. has been staggering with growth less than 1 percent in the first half of 2011.
The report has caused some analysts to speculate that the risk of double-dip recession is becoming more of a likely possibility.
