The volatile ride on global markets continued overnight, this time with US markets dropping on concerns a possible debt deal will be scuttled by a rift between US politicians.
A day after markets rallied on hopes the US Senate was closing in on a deal that would raise the debt ceiling, House Republicans threatened to blow up negotiations by offering their own competing proposal.
Senate Majority Leader Harry Reid criticized the proposal, saying it had no chance of passing the Senate.
The Dow slumped 133 points (-0.9%) to 15168, the S&P500 shed 12 points (-0.7%) to 1698 and the Nasdaq fell 21 points (-0.6%) to 3794.
Across the Atlantic, European stocks managed to stay above water after German data revealed a bigger than expected rise in economic sentiment amid signs the worst of the euro debt crisis has passed.
The UK FTSE climbed 0.6% to 6549, the German DAX rose 0.9% to 8804 and the French CAC put on 0.8% to 4256.
There were losses all round in commodity markets. Oil slid to its lowest levels since early July on fears the ongoing budget fight is damaging the US economy and hurting energy demand.
Gold was also under pressure, failing to find support from safe haven flows. In currency markets, the US dollar was mixed amid continued uncertainty on whether the US will avert a default.
Oil futures slid 1.2% to US$101.21 and gold declined 0.2% to US$1273 an ounce.
The pound recovered earlier losses versus the greenback after data showed a higher than expected rise in the British inflation rate during September.
Finally, the Aussie claimed the 95 US cent handle after yesterday’s RBA minutes signalled the next rate cut may be a while off. There is no major economic data due for release today.