Hong Kong’s Hang Seng index slid about 0.63 percent in early trading, while Shanghai’s Stock Exchange Composite index was down about 0.73 percent.
In Europe, markets were down slightly in early trading, with stocks on key indexes in London, Paris and Frankfurt falling 0.2 percent, 0.5 percent and 0.3 percent, respectively. At the same time, the price of gold, considered a safe haven in uncertain times, jumped 0.2 percent to a record high $1,618 an ounce.
In addition to concerns over a possible U.S. default, markets were absorbing a report Monday morning from Moody’s that downgraded Greek debt by three more notches, plunging it deeper into junk bond status and warning that the country is now almost certain to stage at least a limited default. The rating agency also suggested that the comprehensive Greek bailout reached last week could impact the credit ratings of those nations coming to its rescue.
Of particular concern was France, a nation contributing to the Greek bailout but that some analysts have feared could become caught up in the market turbulence hitting Spain and Italy because of its combination of high debt levels and low growth.
Talks between President Obama and House Speaker John A. Boehner (R-Ohio) broke down Friday evening and efforts to restart the negotiations in time for the opening of Asian markets did not make progress.
The absence of a bipartisan plan for raising the U.S. debt ceiling, and thus avoiding a potential default on Aug. 2, is fueling concerns in global markets because of the crucial role that U.S. Treasury bonds play in all manner of financial transactions. Some analysts expected investors in Asian markets to price some of that concern into stock values.
“Global markets are going to get more and more jittery the longer we go,” said John Peters, senior economist at the Commonwealth Bank of Australia. “Our economy is actually growing quite strongly at the moment,” he added, “but all bets are off when there’s something big looming on the global horizon.”
But Japanese investors have more reason to be worried about the ongoing stalemate in Washington because the Japanese economy is still recovering from March’s earthquake and tsunami.
“I think the stability of the financial market is a precondition for the Japanese economy to recover,” said Katsuyuki Hasegawa, chief market economist with the Mizuho Research Institute in Tokyo. “That pre-condition is now being threatened by the development in the States.”
In addition to watching the Tokyo and Sydney exchanges, investors and policymakers are eager to see how trading fares on the exchanges in Hong Kong and Shanghai, which are to open shortly.