(MENAFN - AFP) Europe's major stock markets slid further on Tuesday, as the US budget standoff entered its eighth day with no end in sight, stoking worries of a catastrophic default.
Meanwhile, the dollar firmed but the price of gold eased.
London's benchmark FTSE 100 dropped 0.78 percent to stand at 6,387.55 points in late morning deals in the British capital.
Frankfurt's DAX 30 shed 0.28 percent to 8,567.67 points and the CAC 40 in Paris retreated 0.51 percent to 4,144.21.
"Nervous investors are voting with their feet as the saga drags on," said Mike McCudden, head of derivatives at online stockbroker Interactive Investor.
Worries over raising the government debt ceiling drowned out angst over a week-long government shutdown in Washington.
Markets are awaiting some movement from lawmakers on Capitol Hill as an October 17 deadline approaches for raising the country's debt ceiling.
Failure to do so will mean the government will be unable to pay its bills or service its debts, causing a default that analysts have warned could send the world economy back into recession similar to that after the financial crisis.
"Another day of inaction in Washington," said Capital Spreads dealer Jonathan Sudaria.
"With such huge uncertainties in the market at the moment, no one has the confidence or nerve to place any sizable positions."
He said: "I still believe that no one in their right mind would allow the US to hit the debt ceiling, causing havoc in financial markets and risking sending a number of countries, including the US itself, back into recession."
Sudaria, echoing the view of many analysts in recent days, added: "A deal will surely be done in the end, which delays the debt ceiling being hit until the end of the year in exchange for some cuts to spending."
The US government will be barred from borrowing after October 17 unless the current 16.7 trillion debt ceiling is lifted.
In company news on Tuesday, shares in French telecom equipment maker Alcatel-Lucent rose by 1.49 percent to 2.930 euros, after the group said it would cut 10,000 jobs, sell some assets and focus research on new technologies, in what one analyst described as a last-chance restructuring.
Shares in French television group TF1 rose by 3.56 percent to 13.80 euros on interest from US group Discovery Communications in acquiring all of the sports channel Eurosport.
In London, Vodafone shares slid 0.87 percent to 216.90 pence, as the Financial Times reported that the mobile phone giant wanted to increase its holding in its Indian unit.
The FT, which cited people familiar with the situation, said that Vodafone was preparing to invest as much as 2.0 billion (1.5 billion euros) to buy out minority shareholders in its Indian business.
The paper added that Vodafone would file an application this month to Indian authorities to gain permission for the investment.
Vodafone declined to comment on the story when approached by AFP.
Asian equities had mostly risen earlier on Tuesday as investors fished for bargains after two days of losses.
Hong Kong rose 0.89 percent, Tokyo added 0.30 percent and Seoul was up 0.42 percent, but Sydney slipped 0.23 percent.
The Shanghai stock market meanwhile climbed 1.08 percent in the first session after a week-long Chinese holiday.
In foreign exchange activity, the European single currency eased to 1.3567 from 1.3579 in New York late on Monday.
The dollar firmed to 97.01 yen from 96.68 yen on Monday.
The British pound rose to 84.47 pence against the euro, but it eased to 1.6061.
On the London Bullion Market, the price of gold edged lower to 1,320.92 an ounce from 1,323.50 on Monday.