US stocks fell on Tuesday while Treasury bill rates rose after negotiations failed to produce an agreement to end the US budget impasse.
Adding to concerns in financial markets, Fitch Ratings placed the US government's AAA credit rating on negative watch on Tuesday, saying: “The political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.”
One upside for markets, though, could be continued monetary stimulus from the Federal Reserve. Richard Fisher, the hawkish president of the Federal Reserve Bank of Dallas, told Reuters on Tuesday that the fiscal standoff means even he would find it difficult to make a case for scaling back bond purchases at the Fed's policy meeting later this month.
Indeed, the US economy may already be slowing. The Federal Reserve Bank of New York reported on Tuesday that its general economic index fell to 1.5 in October, a five-month low, from 6.3 in September.
Meanwhile, elsewhere in the world, the UK reported that inflation there was unchanged in September at 2.7 percent while house prices rose 3.8 percent in the year to August, the fastest rise since October 2010.
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