Oct. 17 - European shares fell as market relief at a last-ditch U.S. budget deal gave way to worries over the economic impact of the government shutdown and prospects of a re-run early next year. Sonia Legg looks at how European investors view the very temporary resolution.
The relief rally over a U.S. budget deal didn't last long. Shares and the dollar fell as soon as markets opened in Europe. Worries over the economic impact of the shutdown and - more importantly - the prospect of doing it all again early next year - dampened initial enthusiasm. BGC's Mike Ingram says U.S. politicians haven't done their country any favours. (SOUNDBITE) (ENGLISH): MIKE INGRAM, MARKET STRATEGIST, BGC PARTNERS, SAYING: "The political pantomime that we have seen over recent weeks actually makes euro zone politicians look good and that's saying something so certainly it hasn't helped. We had that credit warning from Fitch yesterday - I very much doubt they are going to be withdrawing that any time soon and I am sure any additional risk premium is going to be factored into the US yield curve, into the US government 's borrowing costs going forwards." President Obama's attempts to talk up the deal after a 16-day government shutdown cut no ice either with IG's Alastair McCaig. (SOUNDBITE) (ENGLISH): ALASTAIR MCCAIG, MARKET ANALYST, IG, SAYING: "President Obama's comment about lifting the uncertainly and fear over the markets seems pretty mis-placed quite frankly - it's maybe just shifting it slightly down the road - it isn't lifting it at all." China's credit agency Dagong shares that view - it downgraded the America's sovereign rating to A- from A with a negative outlook. Dominic Johnson, Chief Executive of Somerset Capital, says investors will look at America in a different way from now on. (SOUNDBITE) (ENGLISH): DOMINIC JOHNSON, PARTNER AND CHIEF EXECUTIVE, SOMERSET CAPITAL, SAYING: "If I was a really rich guy and I took you out for dinner and I said this is on me I am a billionaire. And I gave them my credit card and the waiter comes back and says 'sorry Sir' this has been declined you would think my reputation was starting to look a bit awkward and is this not a bit of fluff. The long and the short of it is that it is about confidence and it is about sticking to your script and it is that integrity level that America is known for that has been really dented." US politicians have been accused of kicking the can down the road. European leaders have heard that before. But a US debt crisis would be much more worrying for the world economy than Europe's woes and it could take some time for investors' nerves to fade.