Shares flatline as debt limit talks keep investors on edge

Global shares held steady on Tuesday, while the dollar eased back from five-week highs ahead of another round of talks among US lawmakers to resolve the deadlock over the government’s borrowing limit.

Other assets such as commodities got no lift from the retreat in the dollar, as concern about demand from China and the resilience of the global economy dented the likes of copper and crude oil.

Volatility was subdued, as investors remained wary of negotiations over the US government debt-ceiling. Without an agreement, in about two weeks, the government might not be able to pay its bills, reported Reuters.

Investors have dumped short-term US Treasuries that mature around the "X date" - the point beyond which the government runs out of money to pay its bills without an increase in the borrowing limit.

Other than that, however, global markets are showing little evidence of stress, at least for now.

Michael Brown, a strategist at TraderX, said he believed there would eventually be an agreement, but the concessions President Joe Biden's Democrats may have to make in order to strike a deal could come at a high cost to the US economy.

"What I care about in terms of the debt ceiling, isn't the 'is it going to be raised, is it not going to be raised' pantomime stuff," he said.

"What happens next and what needs to happen to get something over the line and, once it’s done, whether the can is kicked or whether there's a longer agreement, I think that will start to come into investors' thinking a little bit more," he said.

The MSCI All-World index (.MIWD00000PUS) was up 0.1%, while stocks in Europe (.STOXX) were flat and US index futures, slipped into negative territory.