America’s political leaders now have just six days to agree a deal to raise the limit on US borrowing Global stock markets suffered fresh losses on Thursday as the US debt talks remained deadlocked, leaving investors braced for shockwaves to rattle the financial world . With no sign of a deal in Washington, there were heavy losses in Asia overnight. There was also a scrabble to sell shares in Europe, as traders reacted to the worst day’s trading in two months on Wall Street on Wednesday. The FTSE 100 fell 54 points at one stage of 5,802, but later clawed back most of the losses as the nervy morning session continued. There were sharper falls on the German and French markets. America’s political leaders now have just six days to agree a deal to raise the limit on US borrowing, and traders are having to confront the possibility – unthinkable just a few weeks ago – that they will fail. “The rout in global equity markets continues as concern builds over the failure of US lawmakers to serve up any meaningful progress regarding the debt ceiling,” said Cameron Peacock, market analyst at IG Markets. “This one item really is dominating the agenda right now.” Europe’s own debt crisis was also in focus, with Standard & Poor’s downgrading Greece’s credit rating. Earlier, Asian markets had seen heavy falls amid concern that the US, the world’s biggest economy and its biggest creditor, might default on its debts. Japan’s Nikkei lost nearly 1.5%, closing 145,84 points lower at 9,901.35. The US government moved to crush speculation that America has more time to resolve the crisis, insisting that the Treasury only has enough funds to last until 2 August. “The problem is there is not enough money because we can no longer borrow money to pay all our bills. You’re basically running on fumes,” White House press secretary Jay Carney told reporters in Washington. “It is a crisis situation.” President Obama continues to push for a long-term deal to raise the debt ceiling. Republicans, though, are proposing a short-term extension – followed by fresh negotiations in 2012. Carney denied that Obama is looking to avoid a repeat of the current debacle in an election year. “It’s not about the re-election,” he said. “The issue here is the effect on the economy.” A short-term deal also raises the chances of America losing its AAA credit rating , warned Michael Hewson of CMC Markets. “Politicians do appear to be making some progress, however a major sticking point would appear to be the Republican insistence of a second vote on a debt ceiling rise before the 2012 election. Given recent comments by ratings agency S&P this may not be wisest course of action by US leaders and could well precipitate a ratings downgrade in the coming months,” Hewson said. The Republican plan is due to be debated and voted on this Thursday, after House speaker John Boehner was forced to rework the legislation – which did not initially deliver the spending cuts he had promised . Gary Jenkins of Evolution Securities is also concerned that the US is flirting with a downgrade, although rating agencies could be placated by a credible long-term fiscal plan to tackle America’s debt. “On the current proposals a downgrade is still likely in my opinion, but at this stage of more concern is the possibility that they don’t even raise the debt ceiling. Surely they couldn’t be that stupid?” Jenkins wrote in a research note. The interest rate on US 10-year government debt remained slightly above the UK equivalent, at 2.97% v 2.963% suggesting that Britain’s gilts are seen as a less risky investment than American Treasuries . Another Greek downgrade S&P warned that banks holding Greek debt will suffer significant losses via the rescue package announced last week, as it cut the country’s rating to CC. S&P said that the upcoming restructuring of Greek debt was a “distressed exchange” because private creditors will suffer losses if they agree to swap or rollover their loans into new 30-year bonds, and accept a “haircut” on the value of the the debt. S&P added that it will probably assign a “low-speculative-grade rating” to new Greek debt. In other banking news, Credit Suisse announced plans to cut 2,000 jobs. HSBC is also reported to be planning to eliminate thousands of positions worldwide in a cost-cutting drive. US economy Economics United States Ratings agencies Financial sector Stock markets European debt crisis Graeme Wearden guardian.co.uk