European Markets Outside Italy Trade Lower on US Debt Default Fears

European markets outside Italy opened lower on 16 October, and continued trading to the downside, amid fears that the US could default on its credit obligations if politicians fail to reach a deal during the day.

The Stoxx Europe 600 index opened 0.3% lower to 313.89.

Britain's FTSE 100 and Germany's DAX opened 0.1% lower.

France's CAC 40 opened 0.5% lower.

Italy's FTSE MIB was trading 0.45% higher.

Spain's IBEX 35 was trading 0.12% lower.

In Washington, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell are expected to resume discussions on 16 October, in a bid to resolve the fiscal gridlock ahead of the 17 October debt-ceiling deadline.

A bipartisan Senate plan outlined on 14 October proposes to fund the government through mid-January and raise the debt ceiling until February, allowing politicians more time to negotiate and agree on a longer-term budget.

The US government shutdown will enter its 16<sup>th day on 16 October and Congress has less than 24 hours to decide on whether to raise the US debt limit.

The world's largest economy could run out of cash to pay its bills after 17 Octoberif the government's borrowing limit is not raised. The country's laws limit its borrowing to $16.7tn (£10.4tn, €12.3tn).

There are various estimates as to when the US government could run out of money.

Economists at JPMorgan provided a precise date of 24 October. However, the Bipartisan Policy Center expects the date to be anywhere between 22 October and 1 November.

Market participants in Europe will be tracking unemployment data coming in from the UK.

The Eurozone's statistics office will put out inflation data for the month of September.

In Germany, Chancellor Angela Merkel's party could be forced to partner with the Social Democrats to form a coalition government, after the Greens backed out on 15 October.

In company news, London-based Hochschild Mining said mining output increased across the board during the July-September third quarter. However, the company said sales were low during the three-month period.

Newspaper distributor Smiths News said its underlying profit before tax for the full-year rose 11.5% to £53.0m, as against £47.5m in the previous year.

French dairy group Danone cut its 2013 forecast after sales at its high-margin baby food business fell 8.6% in the third quarter -- pulled down by infant formula product recalls in Asia during the three-month period.

Hotel group Accor will put out third quarter sales numbers during the day.

On 15 October, the Italian government passed the country's 2014 budget. Elsewhere, Ireland and Portugal's international lenders approved the countries' 2014 spending plans.

In Asia and the US

In Asia, the Japanese Nikkei finished 0.18% higher on 16 October. Australia's S&P/ASX finished 0.07% higher while South Korea's Kospi ended 0.31% lower.

Financial markets in India were closed for a public holiday.

Earlier in Asia, markets witnessed choppy trade amid the uncertainty surrounding the outcome of US Senate discussions due later in the day.

On 15 October, shortly after the US markets closed, Fitch Ratings placed its top rating on US debt under review for a possible downgrade. Fitch highlighted the ongoing budget impasse and debt-ceiling issue as the key reason for its move.

"Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a US default," the agency said in a statement.

On Wall Street, indices ended lower on 15 October as fears surrounding the ongoing fiscal stalemate weighed on investor sentiment.

The Dow finished 133.25 points lower at 15,168.01. The S&P 500 closed 12.08 points lower at 1,698.06 while the Nasdaq ended 21.26 points lower at 3,794.01.

The CBOE Volatility Index (VIX), broadly regarded as the best gauge of fear in the market, jumped above 18.