World share markets and the US dollar face further uncertainty after Republican leaders delayed action on a plan to raise the United States government's $US14.3 trillion borrowing limit.
Agreement must be reached to raise the debt ceiling by the 2 August deadline, to avert a default and credit rating downgrade.
Rival Republican and Democratic proposals have prompted growing nervousness about the risks of a downgrade to the US credit rating.
Serious discussions on a compromise look likely to be delayed for several days after Republicans pushed back a House of Representatives vote on their plan.
Analysis by independent budget experts found it would not deliver the level of spending cuts it promised.
The plan also faces an insurrection from Republican lawmakers, who are aligned with the fiscally conservative Tea Party movement.
The vote will now be delayed until Thursday in the US at the earliest.
Credit rating agencies have threatened to cut America's AAA bond rating if an increase in the debt limit is not accompanied by a plan for controlling long-term deficits.
Wall Street banks are preparing for the real possibility that the United States will lose its top credit rating, which they say will cost the country $US100 billion in additional interest payments and hurt both consumers and the economy.
The International Monetary Fund (IMF) is urging Washington lawmakers to reach agreement, to avoid a default that would have worldwide repercussions.
The IMF's new managing director, Christine Lagarde, says a default or a credit rating downgrade would be a very serious event for the United States and the global economy.
The stalemate in Washington is already having an effect, with investors starting to take cash out of the market and shifting away from some long-term investments.
On Wall Street on Tuesday, the Dow Jones industrial average closed down 91.50 points (0.73%) at 12,501.30.
European stocks closed down 0.3% at 1,100.97 points.
The US dollar fell broadly on Tuesday, helping buoy crude oil prices, while gold hovered near a record high above $US1,600 an ounce as investors sought the precious metal for safety.
Against a basket of currencies, the dollar fell 0.7%. Investors fear a potential debt default and a downgrade of the US credit rating would tarnish the dollar's status as a global reserve currency.
