US stocks slump as debt deal awaits approval

Stocks on Wall Street slumped then recovered after an early rally spurred by the US debt deal fizzled out.

Weak manufacturing data added to worries that ratings firms still could downgrade the US government's credit rating .

Legislators have still to approve a debt ceiling and deficit deal thrashed out over the weekend.

At the close (8am NZ time), the Dow Jones Industrial Average was down 10.90 points, or 0.1%, to 12,132.34, after briefly falling below 12,000 for the first time since late June.

The blue-chip index rose as much as 139 points immediately after the open, as investors greeted the weekend debt agreement, only to decline through the rest of the session.

A July reading on the manufacturing sector came in well beneath economists' expectations.

The S&P 500-stock index was down 0.4%, to 1286.96, with all sectors except telecommunications losing ground.

The Nasdaq Composite also shed 0.4%, to 2744.61.

Markets are still wary over the state of the US debt-ceiling negotiations. A closer look at the pact shows it may not be enough to avoid a ratings downgrades. There is also concern the length of the talks and effects of uncertainty on the markets are hurting the broader economy.

Other markets: Europe falls, Asia rises
European stock markets fell after reversing earlier gains as global manufacturing figures declined.

The euro-zone manufacturing purchasing managers' index fell to 50.4 in July, from 52.0 in June. UK PMI manufacturing data also showed a contraction in manufacturing in July. In Asia, China's PMI fell to 50.7 in July from 50.9 in June..

The broad-based Stoxx Europe 600 index tumbled 1.2% to finish at 262.02, after earlier reaching a session high of 268.01.

In London, the FTSE 100 index fell 0.7% to 5774.43, the French CAC 40 index fell 2.3% to 3588.05 and the German DAX 30 index slid 2.9% to 6953.98.

Asian shares rallied as news broke of the US debt deal though shares in China underperformed after the PMI decline.

Japan's Nikkei Stock Average rose 1.9%, Australia's S&P/ASX 200 added 1.9%, Korea's Kospi Composite gained 1.8%, China's Shanghai Composite Index rose 0.2%, Hong Kong's Hang Seng Index climbed 1.5% and India's Sensex gained 0.8%.

Commodities: Oil, gold drop
Crude futures turned lower as weak manufacturing data trumped the debt ceiling deal.

Light, sweet crude for September delivery was down 60USc at $US95.10 a barrel in New York after rising as high as $US98.60 earlier in the session. Brent crude on the ICE futures exchange traded 31USc lower at $US116.43 a barrel.

Gold futures trimmed their early losses. The most actively traded contract, for December delivery, was down $US1.30 lower, or 0.1%, at $US1,629.90 an ounce in New York.

Currencies: US dollar, euro fall
The Swiss franc and yen rose after the US debt deal failed to ignite markets.

There is still no guarantee the plan could keep the US credit rating from being cut. Meanwhile, investors have been loath to bid up the euro too much from its current levels.

The euro dipped below $US1.42 for the first time since July 21, sliding to $US1.4198. The euro was also routed by nearly 2% against the Swiss franc, falling to a new all-time low of 1.1030 francs.

The US dollar continued to reach new record lows against the franc and plumb session lows against the yen.

The euro was at $US1.4203 from $US1.4397 late on Friday. The dollar was at ¥76.79 from ¥76.77. The UK pound was at $US1.6279 from $US1.6423, while the dollar fetched 0.7811 franc from 0.7854 franc.