Debt Ceiling Saga Continues to Spread Pessimism in Global Financial Markets

Stock markets extended their drop on Wednesday amid rising concerns that U.S. lawmakers will fail to reach an agreement to raise the debt ceiling and reduce the deficit with less than one week remaining before an August 2, deadline set by the U.S. Treasury Department.

Moreover, the U.S. Commerce Department released the durable goods orders for the month of June, where durable goods fell below expectations to confirm the weakness in economic activities during the second quarter of this year.

Pessimism continued to be the dominant theme in global financial markets, as global equity markets fell on Wednesday, while investors sought low yielding and safe assets against higher yielding ones, which pushed stocks and other higher yielding assets to drop.

Stocks in the United States fell by opening on Wednesday, where the Dow Jones Industrial Average was down by nearly 1.0% to trade around 12,376, while the S&P 500 index was down by nearly 1.50% to trade around 1312. European stock indexes were lower before closing on Wednesday, where FTSE 100 was down by nearly 1.25% to trade at 5854 and the DAX was down by nearly 1.60% to trade around 7232.

The U.S. dollar rose back against a basket of major currencies on Wednesday, where the U.S. dollar index was trading at 73.70, compared with the opening level at 73.51. The Euro dropped against the Dollar, where the EUR/USD pair traded at $1.4426, compared with the opening level at $1.4508, and the British Pound also dropped against the Dollar, where the GBP/USD pair traded around $1.6372, compared with the opening level at $1.6418.

Gold prices rose on Wednesday to a new record high at $1628.38 an ounce, where gold was trading around $1625 an ounce recently, and crude oil prices fell after the EIA report showed crude oil inventories increased above expectations, to trade around $97 a barrel.