Markets 'will weather future US debt talks'

Markets 'will weather future US debt talks'

Global markets are expected to weather future rounds of United States debt-ceiling negotiations relatively well, analysts say.

Investors will be increasingly confident that politicians will stitch together an eleventh-hour deal as they did again this week.

Even though it was a tense period leading up to the latest deal in the US Congress on Wednesday, there was much less market panic than back in July 2011, when the issue last erupted in Washington.

The debt-ceiling crisis of 2011 led to the most volatile week for global markets since the 2008 global financial crisis, with the Dow Jones Industrial Average shedding 4.2 per cent in the week before the deal.

Investors were deeply fearful back then that the US could trigger financial Armageddon by defaulting on its borrowings.

The falls this time round on Wall Street and elsewhere were less severe. The Dow actually rose in the week leading up to the deal, but in the week before that, it fell 2.7 per cent.

"Market volatility will be less pronounced with each debate," said Mr Desmond Chua, market analyst at CMC Markets. "With each political impasse, people will give less weight to it... It seems like sooner or later they would have to (raise the debt ceiling)."

He said that the impact on stocks was "very limited" in recent weeks.

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