Markets jittery over US debt deal

DESPITE the US Government nearing completion of its deal to up its borrowing limit and temporarily avert defaulting on its debt, international markets reacted nervously to Stateside news yesterday.

The raising of America’s debt ceiling may end the immediate risk of a US default — which would surely plunge financial markets and economies around the world into turmoil — but analysts were yesterday suggesting that it wouldn’t go far enough to secure the US the top AAA credit rating.

Added to that, weak US manufacturing data published yesterday — showing a 4.4% decline in July activity to a two-year low — kept international markets jittery and added to concerns that the American economy is still only on a slow track to growth.

Each of the main European markets lost ground yesterday in reaction. London’s FTSE was down 0.7% at 5,774 points; Frankfurt’s DAX fell by just under 3% at 6,954 points, and the CAC-40 index in Paris dropped by 2.27% to 3,588 points.

Dublin didn’t escape any of the negativity either — the ISEQ falling by 2.3% to 2,756 points. Building materials giant, CRH (which was down by over 80c to €12.87); support services group, DCC (which fell by 42c to €18.40), paper and packaging group, Smurfit Kappa (down 32c at €6.85) and bakery giant, Aryzta (down 27c to €37.30) were among the individual heavy fallers in yesterday’s bank holiday trading.

Kerry Group was also down 30c at €28.45, while freight and ferry services business, Irish Continental (ICG) was one of the few notable climbers, rising by 24c to €15.49; pharmaceutical company Elan another positive mover, rising 10c to €7.92.

Markets in both the US and Asia reacted well, however, to the resolving of the US debt issue; although the former turned during the afternoon in the midst of disappointing domestic manufacturing data.

In Asia, Tokyo’s Nikkei Index was up by 1.3% at 9,965 points, while the Hang Seng in Hong Kong finished up by 0.9% at 22,663 points.