European markets fell slightly on Thursday – a stark contrast to Wall Street on Wednesday, where share indexes closed higher on news of the US debt default deal between Democrats and Republicans. Tokyo followed Wall Street.
The subdued European reaction may have been down to investors banking on a US agreement and then choosing to lock in gains.
Robert Halver, the Head of Baader Bank’s Capital Markets division said: “As the United States has always saved the world with new debt, most people were confident they would succeed this time around, even if it was at the last moment. The Americans haven’t let us down but this time they really pushed the boundaries.”
Halver pointed out, however, that the deal was a temporary fix, saying: Now the financial circus will start all over again at the latest in January when a new round of meetings in America must produce an answer to what needs to be done to lift the debt limit.”
Currency and bond traders also questioned whether the Federal Reserve might now delay the planned withdrawal of its monetary stimulus. The clock is ticking and despite this last-gasp deal, the fiscal saga is by no means over.