Global stocks diverge amid scepticism over US deal

Stock markets fell in Europe and the United States but mostly rose in Asia on Thursday as sceptical investors weighed up a last-gasp deal to raise the US debt ceiling and avert a disastrous default.

The dollar lost ground against the euro, but the yield on US Treasury 10-year bonds edged down.

In afternoon deals, London's FTSE 100 index shed 0.26 percent to 6,556.78 points.

Frankfurt's DAX 30 fell 0.65 percent to 8,788.60 points and the CAC 40 in Paris gave up 0.40 percent to 4,226.80 compared with Wednesday's closing values.

US stocks opened sharply lower Thursday as investors turned their attention to corporate earnings after the previous day's deal in Congress removed the threat of a debt default.

A 7 percent plunge in IBM's shares, after it reported a sharp fall in third-quarter sales, dragged the Dow down.

The Dow Jones Industrial Average slid 0.81 percent to 15,249.12 points after five minutes of trading.

The broader S&P 500 lost 0.39 percent to 1,714.75 points, and the tech-rich Nasdaq Composite fell 0.41 percent to 3,823.64.

However, Asian shares mostly rose after US lawmakers passed a last-minute bill to reopen the government and lift the country's borrowing limit, avoiding a default that threatened to spark another global recession.

Some investors breathed a sigh of relief as Republican and Democratic senators found a compromise after weeks of bitter rows on Capitol Hill that called into question Washington's credibility.

However, the optimism was tempered by worries that the agreement -- which extends the US Treasury's borrowing authority until February 7 -- is only a temporary measure and problems could resurface within months.

"European equities are trading down ... after a disappointing resolution to the US debt limit," Spreadex trader Alex Conroy told AFP.

"The initial euphoric surge in the markets in anticipation of and after the announcement has today lead to speculators closing out their positions while they can."

Weighing damage to US economy

CMC Markets analyst Michael Hewson said investors were reflecting "on what damage has been done to the US economy and the effect on growth as well as company earnings on what has been a rather costly exercise".

The interest rate or yield on benchmark 10-year Treasury bonds was at 2.62 percent, down from 2.663 percent late on Wednesday in trading on the secondary market for debt already issued.

The euro rallied on Thursday to reach its highest level against the dollar in 8.5 months, climbing to $1.3668 from $1.3560 late in New York on Wednesday.

"Dollar weakness has driven euro/dollar to new eight-month highs around $1.3668 as markets price in comments from global credit ratings agencies concerning the quality of US government debt in the aftermath of the debt ceiling debacle," CMC Markets analyst Matt Basi told AFP.

But most market participants "are able to decipher for themselves that when a government comes within hours of a default, their credit might not be as good as it used to be," he added.

The dollar also gave up ground versus the yen, sliding to 97.83 yen from 99.01 yen late on Wednesday.

The pound rose to $1.6131 from $1.5945 the previous evening, and to 1.1811 euro from 1.1783.

The price of safe-haven gold meanwhile hit a one-week high point at $1,321.38 an ounce on the London Bullion Market, driven also by the weaker dollar which made the precious metal cheaper for holders of rival currencies.

It later pulled back to $1,308.50, up from $1,278.25 on Wednesday.

Asian equities were broadly positive, with Tokyo closing up 0.83 percent, Seoul adding 0.29 percent and Sydney climbing 0.38 percent in value.

But Hong Kong lost 0.57 percent and Shanghai closed down 0.21 percent as dealers also awaited Friday's release of China's third-quarter economic growth data.

Global markets had been on tenterhooks over the US government impasse, which saw Democrats refuse to give in to Republican demands for a new budget to include cuts to President Barack Obama's flagship healthcare bill.

But with just hours to go before a Thursday deadline to raise the debt ceiling, Senate party leaders reached an agreement to reopen a government that was shut down on October 1, while extending the debt ceiling until the new year.

Congress passed the bill with cross-party support before it was signed by Obama in the early hours.

burs-rl/arp