Investors remain nervous even though there is a widespread expectation US lawmakers will eventually hammer out a deal to lift the debt ceiling and avert a default

London (AFP) - Stock markets struggled on Tuesday after fresh talks between President Joe Biden and House Speaker Kevin McCarty on raising the US debt ceiling ended without an agreement.

With just over a week to go before the United States runs out of cash, the standoff has become the key topic on trading floors on fears that a failure by Washington to pay its bills will send shockwaves through markets and the global economy.

The tech-rich Nasdaq and the S&P 500 were down near midday but the Dow was flat.

European stock markets and major Asian indices finished in the red.

Months of negotiations have failed to break the deadlock and lift the borrowing limit from the current $31.8 trillion, though Biden and McCarthy ended their latest meeting on Monday on a positive note.

Both Biden and McCarthy described the talks as “productive”, but the US president said there were still “areas of disagreement”.

The House speaker said negotiators would “work through the night” to move the sides closer and that he and Biden would “talk every day to try to find a way to get this done”.

While the two sides agree a default must be averted, they continue to disagree on certain issues. Democrats want to close tax loopholes to raise revenue and Republicans are calling for spending cuts.

Still, there is a broad view that a deal will eventually be done.

“Stock market participants are appearing fatigued by all the talk and the absence of the all-important action of raising the debt ceiling with June 1 lurking as a potential X-date when the US might not be able to pay all its bills,” said analyst Patrick O’Hare.

In Europe, eurozone stock markets dropped as data showed eurozone economic growth slowed in May. London’s FTSE 100 also fell even as the IMF upgraded its forecast for the UK economy, saying it no longer expects a recession this year.

Back in the United States, the Federal Reserve remains in focus ahead of next month’s policy meeting, as investors track whether it will lift interest rates again or leave them unchanged for the first time since starting its hiking campaign more than a year ago.

“The debt ceiling drama has been a permanent distraction of late, but other components in the fray include the specter of the Fed continuing to raise rates, because inflation remains too high,” O’Hare said.

- Key figures around 1545 GMT -

New York - Dow: FLAT at 33,282.78 points

London - FTSE 100: DOWN 0.1 percent at 7,762.95 (close)

Frankfurt - DAX: DOWN 0.4 percent at 16,152.86 (close)

Paris - CAC 40: DOWN 1.3 percent at 7,378.71 (close)

EURO STOXX 50: DOWN 1.0 percent at 4,342.38 (close)

Tokyo - Nikkei 225: DOWN 0.4 percent at 30,957.77 (close)

Hong Kong - Hang Seng Index: DOWN 1.3 percent at 19,431.25 (close)

Shanghai - Composite: DOWN 1.5 percent at 3,246.24 (close)

Euro/dollar: DOWN at $1.0779 from $1.0813 on Monday

Pound/dollar: DOWN at $1.2423 from $1.2437

Dollar/yen: UP at 138.70 yen from 138.60 yen

Euro/pound: DOWN at 86.76 pence from 86.94 pence

West Texas Intermediate: UP 1.7 percent at $73.26 per barrel

Brent North Sea crude: UP 1.5 percent at $77.14 per barrel