(MENAFN - AFP) European stock markets mostly fell on Monday while the euro edged up against the dollar as the US budget stand-off entered a seventh day with no end in sight.
London's benchmark FTSE 100 dropped 0.26 percent to 6,437.28 points and Frankfurt's DAX 30 fell 0.36 percent to 8,591.58 points. However the CAC 40 in Paris edged up 0.03 percent to 4,165.58 points
On Wall Street, US stocks fell in midday trade, with the Dow Jones Industrial Average off 0.40 percent and the tech-heavy Nasdaq losing 0.44 percent.
"Having been critical for so long of European politicians' response to the crisis in Europe over the years, it is now the turn of the US to be at the beck and call of dysfunctional politics and politicians," said Michael Hewson of CMC Markets UK.
"I wonder if any of these Democrat and Republican politicians currently bickering amongst themselves, with the fate of the world economy in their hands, can see the irony in how the worm has turned, and how their behaviour damages the credibility of the US in the eyes of the rest of the world."
The European single currency rose to 1.3580 from 1.3557 in New York late on Friday.
The dollar fell to 97.02 yen from 97.46 yen on Friday.
Sterling rose against the euro to 84.42 pence to a euro and it rose to 1.6086.
On the London Bullion Market, the price of gold rose to 1,323.50 an ounce from 1,309.75 on Friday.
The "terrible" and "unthinkable" threat of a US government default continued to transfix Washington Monday, as a standoff over raising the debt ceiling surmounted angst over a week-long government shutdown.
US Treasury Secretary Jack Lew on Sunday warned that Congress was "playing with fire" as Republican House leader John Boehner said the party would not raise the US debt ceiling without spending cuts.
Global markets are on tenterhooks, with concerns that if the borrowing limit is not raised by October 17 -- when the country runs out of cash -- Washington will not be able to pay its bills and will default.
"If anything the positioning of the two parties appears to be becoming more polarised and not less and as a result it seems unlikely that we will see a swift conclusion to the current impasse, which is sure to stoke even more uncertainty, as we close in on the October 17th deadline," Hewson said.
A similar stand-off in 2011 went down to the wire before the debt ceiling was raised, but not before world stock markets tumbled and Standard & Poor's stripped the United States of its top AAA rating.
Aerospace sector in focus
On the corporate front, the aerospace sector was in focus Monday, as Airbus announced a 9.5-billion deal with Japan Airlines -- its first jet order from the carrier that challenges rival Boeing's dominance in the Japanese market.
Shares in Airbus parent EADS jumped 2.21 percent to 53 euros.
Air-France-KLM dropped 1.18 percent to 7.44 euros despite the group saying that a deep restructuring plan with big job cuts was rescuing Air France, and that the whole company would become profitable by the end of the year.
In London, airlines also suffered with British Airways parent IAG down 1.66 percent to 336.9 pence and Easyjet sliding 2.85 percent to 1,260 pence.
Shares in Belgian special chemicals group Solvay rose by 1.16 percent to 108.75 euros after the firm announced that it was buying US chemicals company Chemlogics.