Shares subdued on US budget cuts, Italian political deadlock worries

Shares in global markets held steady, with the euro hovering just above a seven-week low while German government bonds were up today, as  economic fallout worries of impending US spending cuts dominated sentiment. The continuing stalemate in Italy's politics added to the depressed outlook.

Automatic spending cuts worth $85 billion are due to kick in today after the failure of US lawmakers to reach a deal to avoid them.

The International Monetary Fund said yesterday it would probably cut 0.5 percentage points off its 2 per cent 2013 growth forecast for the US economy with the full implementation of the cuts.

According to some analysts, financial markets were eerily calm about the issue. They added nobody was talking about the sequestration and they worried about the seeming lack of interest when market sentiment was far from stable after sharp swings following the Italian election.

After shares in Asia slipped, European shares also had a slow start, with Italy's FTSE MIB stock market down 0.5 per cent while London's FTSE 100, Frankfurt's DAX and Paris's CAC-40 remained flat.

Concerns are up after Italy's political deadlock, over its economic rehabilitation program.