Effect of US Shutdown on Stock Markets
After USA Congress failed to negotiate a compromise on short term government spending, it ordered partial shutdown of government agencies. The effect of this shutdown in USA already effected stock markets there. Dow Jones, closed in the red which is down by 0.9 percent. As the USA Congress failed to approve budget for the fiscal year starting Tuesday, Mr. Obama acknowledged that the “days ahead could mean more uncertainty, including possible furloughs” for civilian employees. Mr Obama signed a law to pay salaries to defence employees despite this shut down.
The issue started with the introduction of Health care act by President Obama. This bill is popularly called in USA as ‘Obama Care’. It is intended to provide health care protection who are not already covered under health insurance. Due to the stand off between Obama’s Democratic party and Opposition’s republican parties on the health care bill issue, short term emergency spending bill is not gone through. Although, Republican party leader in Senate Harry Read assured to remove the points raised by opposition, it was not fruitful.
Similar incident of US shutdown of government machinery in United States of America took place 17 years back from 16 Dec 1995 to 06 Jan 1996. What this cause is no payments to government servants which forced them to go on leave. This effects major government activities.
Present shutdown in USA will effect salaries of 8 Lakhs government employees there. It may be possible for them to boycott their duties. If the employees go on leave it will partially effect government services.
How it will effect stock markets? As SEC in USA may not process Initial Public Offers and other funds raising processing activities it may effect financial markets in USA. As an effect of this USA main stock index dowjones closed around 130 points.
At this point of time, it is not known for how long this shut down will continue. If it is for short term, there may not be any major effect on world’s stock markets including in India. But prolonged shut down may effect services which will have an cascading effect on other stock markets in the world.
Although, US Congress ordered partial shut down of government machinery as short term expenditure bill could not be approved, it will not effect emergency services like Air travel and health care programs etc., At present republicans prevailed to stop temporary spending bill in an attempt to stop Obama’s health care bill. There is a deadlock in congress on the issue and as a result the bill could not be passed.
Please read effects of US Shut down 66 Questions and answers about US Shut down. It has very detailed information about US Shutdown, it’s causes effect.