Global stocks down as U.S. budget duel heats up

BANGKOK Global stock markets fell Wednesday, dragged down by fears that political gridlock in Washington over the federal budget might shut down the U.S. government.

The government will reach its borrowing limit, or debt ceiling, by Oct. 1. If Congress doesn't raise that limit, the government won't be able to pay all its bills, possibly shaking confidence in the world's biggest economy.

That leaves just days for the White House and Republican lawmakers, who disagree sharply on spending cuts and other key budget issues, to reach a compromise. Republicans are demanding that any increase must result in expenditure cuts of an equal amount. President Barack Obama is demanding a debt limit increase with no conditions attached.

"Ahead of that, investors don't want to make a move," said Jackson Wong, vice president of Tanrich Securities in Hong Kong. "Investors are still pretty cautious."

Britain's FTSE 100 fell 0.2 percent in early trading to 6,555.87. Germany's DAX dropped 0.1 percent to 8,656.26. France's CAC-40 was marginally lower at 4,192.59.

Wall Street also appeared headed for a muted session, with Dow Jones industrial futures flat at 15,283. S&P 500 futures fell 0.1 percent to 1,690.90.

Earlier in Asia, Japan's Nikkei 225 index fell 0.8 percent to close at 14,620.53. South Korea's Kospi lost 0.5 percent to 1,998.06. Australia's S&P/ASX 200 advanced 0.8 percent to 5,275.90.

Though sentiment was far from rally territory, Hong Kong's Hang Seng advanced 0.1 percent to 23,209.63 on the heels of data showing improvement in mainland China's economy, Wong said.

"The rebound is not strong enough so that would not trigger speculators to get back into the market," he said.

Investors also will be monitoring comments from U.S. Federal Reserve officials to see when the central bank will begin to reduce its monetary stimulus.

U.S. economic data Tuesday did little to cement expectations of when the Fed may act. One report said home prices rose the most in more than seven years in July. Another showed that Americans' confidence in the economy slipped in September.

"With a distinct lack of cohesion and an array of conflicting messages on monetary policy emanating from the Fed in the past few days, it is no wonder that an air of caution persists in equity markets," said Matt Basi of CMC Markets in a commentary.

Among individual stocks, Tokyo Electron jumped more than 13 percent. The company is being acquired by Applied Materials, a U.S. maker of semiconductor chip-making machines in a $9.39 billion all-stock transaction.

Benchmark oil for November delivery was up 23 cents to $103.36 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 46 cents to close at $103.13 per barrel on Tuesday.

In currencies, the euro rose to $1.3495 from $1.3470 late Tuesday. The dollar fell to 98.52 yen from 98.70 yen.