The euro is at eight-month highs against the dollar. It was given another boost Wednesday by news that Italy had averted the threat of snap elections , and the possibility that U.S. political gridlock may force the Federal Reserve to keep pumping money into the economy at full throttle. Draghi said he didn’t expect the U.S. to default — a risk if it doesn’t raise the limit on government borrowing later this month — and believes the government shutdown will be short-lived. “If it were to be protracted it would certainly be a risk for the U.S. and world recovery, so we have to have this present in our minds,” he said. Federal workers sound off on shutdown Draghi repeated previous guidance that interest rates would remain at current or lower levels for an extended period of time, but stressed there were other tools at the bank’s disposal, and none were off the table. Interbank lending rates remain higher than the ECB would like and lending to non-financial firms shrank further in August. Loans to households grew by 0.4%, but that rate has barely moved since the start of the year. Some economists now expect the ECB to launch a third long-term refinancing operation, or LTRO, before the end of the year to provide more cheap funds to eurozone banks.
The first face-to-face talks between President Barack Obama and congressional leaders failed to break the budget impasse as a partial U.S. government shutdown entered its third day. The hard-landing fear in China is fading, said Adrian Zuercher, a global strategist at Credit Suisse ( Hong Kong ) Ltd., part of the Swiss banks asset-management unit that oversees about $433 billion. The fear is that the U.S. economys performance will suffer with the government shutdown. Philippines Upgrade More than two stocks rose for each that fell on the Stoxx 600 index, following a 0.7 percent decline for the benchmark gauge yesterday. The euro strengthened 0.1 percent to an almost eight-month high, before a report that may show retail sales in the region increased in August from a month earlier. Equity indexes in Hong Kong and Taiwan climbed at least 0.9 percent. Japan s Topix Index (TPX) slipped 0.1 percent and the yen weakened 0.4 percent, while exchanges in China and South Korea were shut for holidays. The Chinese services index rose to 55.4 in September from 53.9 in August, the Beijing-based National Bureau of Statistics and Federation of Logistics and Purchasing said today. A number more than 50 indicates an expansion. The Philippine peso extended early gains after Moodys raised the nations rating by one level to Baa3, the lowest investment grade, and said the outlook is positive. The country won investment-grade credit scores from S&P and Fitch Ratings earlier this year.