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Monday
Jul252011

Asian Markets Sluggish on Debt Deal Uncertainty

Comstock Images/Thinkstock(WASHINGTON) -- Asian markets fell Monday as worry widened over the inability of U.S. political leaders to reach an agreement over raising the debt limit and avoiding an impending default as the Aug. 2 deadline draws near.

The debt dilemma has led oil prices to dive below $99 a barrel amid belief that the demand for crude oil will be reduced.

In Hong Kong, Secretary of State Hillary Clinton appealed to Asian nations that they should hold their faith in the U.S. economy, reminding them that the county has recovered from such instability in the past. Clinton predicted that a debt ceiling deal would be reached before the Aug. 2 deadline to avoid an unprecedented default.

It is feared that if an agreement is not reached, the United States could lose its triple-A credit rating.

"The political wrangling in Washington is intense right now," Clinton said. "But these kinds of debates have been a constant in our political life throughout the history of our republic. And sometimes, they are messy.

"I am confident that Congress will do the right thing and secure a deal on the debt ceiling, and work with President Obama to take the steps necessary to improve our long-term fiscal outlook."

Democrats are currently ironing out a deal that would have $2.7 trillion in cuts over the next 10 years, no tax increases and a debt ceiling increase (of $2.4 billion) that would last until 2013.

The Republican two step plan would see $1.2 trillion in cuts now, and a debt ceiling increase of about $1 trillion, or enough to last until February 2012. For the second step, a bipartisan committee would be created to identify another $1.8 trillion in cuts. After these cuts are approved, the debt ceiling would then be extended until 2013.

Ongoing bipartisan talks over the debt ceiling broke down over the weekend. Senate Majority Leader Harry Reid stated in a letter Sunday that the talks ended "over Republicans' continued insistence on a short-term raise of the debt ceiling."

As negotiations continue on Capitol Hill, gold is now trading at a record price ($1,613 per troy ounce) and the dollar is dropping against other currencies.

Copyright 2011 ABC News Radio

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