July 26 - Asian shares rebound Tuesday, but the dollar slides to a record low against the Swiss franc after Obama warns of severe economic consequences from a U.S. debt default. Arnold Gay reports.
Asian shares rebounded Tuesday (July 26), but the dollar slid to a record low against the Swiss franc after Obama warned of severe economic consequences from a U.S. debt default. SOUNDBITE (English) U.S. PRESIDENT BARACK OBAMA SAYING: "For the first time in history, our country's Triple A credit rating would be downgraded, leaving investors around the world to wonder whether the United States is still a good bet. Interest rates would skyrocket on credit cards, mortgages, and car loans, which amounts to a huge tax hike on the American people. We would risk sparking a deep economic crisis - one caused almost entirely by Washington. Defaulting on our obligations is a reckless and irresponsible outcome to this debate." With no hints of an impending deal in his speech, speculators took aim at the greenback, sending the dollar index down to a near 7-week low. But so far investors have shown few signs of panic, with stocks overcoming early caution to move higher Tuesday (July 26). Portfolio managers and traders say they believe a deal will be reached. Tokyo stocks maintained their upward trend boosted by strong earnings from Canon, and expectations of improved earnings forecasts from other Japanese manufacturers. Banks and miners led the gains in Australia, with the visiting former British Prime Minister Tony Blair adding his voice to Obama's efforts at avoiding a default. SOUNDBITE (English) FORMER BRITISH PRIME MINISTER TONY BLAIR, SAYING: "Everybody hopes and believes that, shortly before midnight, that the deal will be done that allows the situation to stabilize because obviously it's dramatically important for everyone that it does. What President Obama is trying to do is correct, in saying he wants a big deal that actually sorts the problem out. Not one that kicks the can down the road. Actually, not very far down the road either. Because that's not going to help anybody." The MSCI index of Asia-Pacific shares rose over one percent, recouping all of Monday's losses by midday. Still, some market players are taking no chances, shifting funds into safe-haven gold and the Swiss franc. Arnold Gay, Reuters