Asian officials braced for some financial-market volatility after the Federal Reserve announced plans to reduce its monetary stimulus, with South Korea pledging to act to cool currency fluctuations if needed.
China and Japan, which together hold more than $2.4 trillion in U.S. Treasuries, raised pressure on the U.S. to resolve a political impasse on its debt ceiling that threatens to destabilize global financial markets.
China will this month complete an audit of local-government debt to assess risks to its financial system, ahead of a Communist Party meeting in November to set economic policy, a government official said.
President Barack Obama reiterated that he won’t negotiate with Republicans over the partial government shutdown and the U.S. debt limit as Senate Democrats began preparing for a test vote on a clean debt-ceiling bill.
Risk appetites in American capital markets diminished amid the U.S. budget impasse, pushing Treasury one-month bill rates to the highest since 2008 and Internet stocks to the biggest losses in two years.
Leaders of the world’s biggest economies grappled with fallout from potential stimulus exit as the BRICS countries said they will create a $100 billion pool of currency reserves to guard against financial shocks.
Finance chiefs singled out the U.S.’s fiscal fight as the most pressing threat to the global economy as they urged lawmakers to find a resolution quickly and avoid a destabilizing default of the world’s benchmark debt.