But as Thursday's deadline edged nearer with no agreement between warring politicians in sight, the potential catastrophe failed to spark major sell-offs with investors betting a last-minute deal was likely to be reached.
The FTSE 100 Index was up 20.5 points to 6507.6 while France's Cac 40 and Germany's Dax ended marginally down.
Meanwhile, in New York, the Dow Jones Industrial Average was 0.5% down in early trading though the losses were later narrowed after the announcement of talks between Barack Obama and congressional leaders spurred hopes of a breakthrough. However language coming from the White House was uncompromising, saying the president "will not pay ransom" for legislators taking steps to pass bills on government spending and the government's borrowing limits.
On the currency markets, sterling was flat against the dollar at 1.60 US dollars and against the euro at 1.18 euros. The latest developments came as traders returned to their desks following little signs of progress over the weekend.
In London, the FTSE 100 index dipped into negative territory early on, amid a nervous start to the week that was barely boosted by figures showing a rebound in production from factories in the eurozone. Output is still labouring well behind its pre-crisis peak. Germany's Dax and France's Cac 40 both slipped into the red.
Brenda Kelly, senior market strategist at IG, added that the continuing division between Democrats and Republicans was leading to a move to defensive stocks such as those involved in staple foods and utilities.
Among them was Associated British Foods, the Primark owner whose diverse portfolio also includes a major sugar business. Shares were up 52p to 1963p.
Water giant Severn Trent, meanwhile, rose 22p to 1808p.
Among the stocks under pressure were banks, with Royal Bank of Scotland off 5.2p to 371.7p and Lloyds Banking Group down 0.4p to 75.7p. This was after a ratings downgrade on RBS from Bank of America Merrill Lynch.
Speciality chemicals firm Johnson Matthey set the pace in the FTSE 100 Index, up nearly 6% or 166p to 2987p after an upgrade from JPMorgan Cazenove.
The two-day performance means 690,000 ordinary investors who have each bought around £750-worth of stock have gained more than £300 each.
The biggest risers on the FTSE 100 were Johnson Matthey, Travis Perkins, up 85p to 1763p, Resolution Limited, up 10.9p to 336p and Associated British Foods.
The biggest fallers on the FTSE 100 were SABMiller, down 44p to 2970p, Glencore Xstrata, down 4.7p to 331.2p, Royal Bank of Scotland, and Centrica, down 4.6p to 358.7p.