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Asian stocks fall and gold hits record, but reaction to U.S. debt impasse is mostly muted [Updated]

July 24, 2011 |  6:01 pm

Key Pacific rim stock markets fell in early trading Monday, as global investors reacted negatively to the continuing impasse in Washington over the federal debt ceiling.

Gold jumped to a new high, but the dollar was little changed against other major currencies.

Investors have feared that global markets could dive if the White House and Congress failed to raise the $14.3-trillion debt ceiling by the Aug. 2 set by the U.S. Treasury. Unable to borrow additional funds, the Treasury would be at risk of defaulting on its debts, at least temporarily.

But early Asian market trading showed no signs of panic or collapsing asset prices.

In Tokyo the Nikkei-225 stock index was off 62 points, or 0.6%, to 10,069 about one hour after the opening bell Monday. But trading was choppy rather than straight down.

The Australian and South Korean markets were off more sharply, down 0.8% each.

[Updated at 10:30 p.m. PDT: Well into the Asian trading day, Japan's Nikkei-225 index was off 0.8%, the South Korean market was down 0.9% and Australian shares fell 1.5%, while markets were flat in India and Thailand. China's Shanghai market was down 2.2%, but it was hit by deep losses in railroad stocks after a deadly bullet-train accident.]

Gold, the classic refuge in times of geopolitical turmoil, initially surged to a record $1,624 an ounce in Asian futures trading, but then backed off to about $1,614, up from $1,601 on Friday.

U.S. Treasury bond prices were modestly lower, pushing yields higher. The 10-year T-note yield rose to 3.00% from 2.97% on Friday. Despite the risk of a U.S. debt default, Treasury bond yields in recent days have been holding near their lows for 2011, suggesting investors were relatively unconcerned.

In currency trading the dollar was slightly weaker. The euro inched up to $1.438 from $1.435 on Friday. The greenback slipped to 78.42 yen from 78.54.

-- Tom Petruno


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