Asian markets fall as US shutdown nears

What does shutdown mean for two million federal employees, agencies and tourist destinations?

Related Stories

Asian markets have fallen on fears that the US may be heading for a shutdown of government services.

The US needs to agree a new spending bill before the financial year ends at midnight on Monday. But political divisions have resulted in a stalemate.

There are worries over the economic impact of a failure to do so, which may see non-essential federal services shut and staff placed on unpaid leave.

Stock indexes in Japan, Hong Kong, Australia and South Korea all declined.

Japan's Nikkei 225 index fell 2%, Hong Kong's Hang Seng was down 1.5%, Australia's ASX dropped 1.7%, while South Korea's Kospi shed 0.7%

"It is the fear of the unknown," said David Kuo of financial website the Motley Fool. "No one knows what is really going to happen and markets don't like uncertainty."

"There is likely to be some reduction in US government spending, but we don't know what areas are going to be affected.

"Until that is resolved, we are likely to see volatility in the markets," he added.

Voting for shutdown?

One of the key areas of debate between the Democrats and the Republicans has been President Barack Obama's healthcare law, popularly known as Obamacare.

Start Quote

Any member of the Republican Party who votes for this bill is voting for a shutdown”

End Quote Jay Carney White House spokesman

Early on Sunday, the Republican-run House of Representatives passed an amended version of the Senate spending bill that removed funding from the healthcare law, raising the chances of a shutdown.

US Senate Majority leader Harry Reid has vowed that his Democrat-led chamber will reject the Republican bill.

"Tomorrow, the Senate will do exactly what we said we would do and reject these measures," said Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid.

"At that point, Republicans will be faced with the same choice they have always faced: put the Senate's clean funding bill on the floor and let it pass with bipartisan votes, or force a Republican government shutdown."

Speaking for the president, White House spokesman Jay Carney said: "Any member of the Republican Party who votes for this bill is voting for a shutdown." The president, he said, would also veto the Republican bill.

Shutdown impact

Market Data

Last Updated at 02:43 ET

Market index Current value Trend Variation % variation
Nikkei 225 17795.73 Up 27.43 0.15%
ASX All Ords 5516.60 Up 5.10 0.09%
Hang Seng 24870.36 Up 63.08 0.25%
SSE Composite 3352.96 Down -30.22 -0.89%
SSE SE 50 2522.10 Down -40.26 -1.57%
BSE Sensex 29590.10 Up 311.26 1.06%

If the government does shut down on 1 October, as many as a third of its 2.1 million employees are expected to stop work - with no guarantee of back pay once the deadlock is resolved.

National parks and Washington's Smithsonian museums would close, pension and veterans' benefit cheques would be delayed, and visa and passport applications would be stymied.

Programmes deemed essential, such as air traffic control and food inspections, would continue.

The defence department has advised employees that uniformed members of the military will continue on "normal duty status", but "large numbers" of civilian workers will be told to stay home.

'Far more dangerous'

The looming shutdown, which would be the first for 17 years, is not the only crisis the US government is facing.

The US government and Republicans are also at loggerheads over extending the government's borrowing limit.

Crisis jargon buster
Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating
The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule.

The US Treasury Secretary has warned that the US will hit its debt ceiling by 17 October, leaving the government with half the money needed to pay its bills.

Earlier this month Jack Lew said that unless the US is allowed to extend its borrowing limit, the country will be left with about $30bn to meet its commitments, which on certain days can be as high as $60bn.

A failure to raise the limit could also result in the US government defaulting on its debt payments.

President Obama has warned that "failure to meet this responsibility would be far more dangerous than a government shutdown".

Washington faced a similar impasse over its debt ceiling in 2011. Republicans and the Democrats only reached a compromise on the day the government's ability to borrow money was due to run out.

That fight was resolved just hours before the country could have defaulted on its debt, but nevertheless led to ratings agency Standard & Poor's downgrading the US for the first time ever.

The 2011 compromise included a series of automatic budget cuts known as the "sequester" which came into effect earlier this year.

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Business Live

  1.  
    07:34: AG Barr results
    bru

    Fizzy drink maker and manufacturer of Irn Bru said it delivered a "robust performance" and should hit analysts' targets for the year. It had 5% growth in the fourth quarter, "well ahead of the total soft drinks market."

     
  2.  
    07:26: Greece euro exit? BBC Radio 4

    Greece should tell Europe it will not pay its debt and will exit the eurozone, Lord Desai tells Today. He says the country has to decide whether it wants "misery now or misery forever". He suggests that has to be the starting point of any negotiations with the Troika - the IMF, ECB and EU. He adds no country has ever paid debts like this in the past. Germany did not pay all its reparations, he says. "The international community has to recognise you can't put such a incredible burden on a people regardless of whose fault it was," he adds.

     
  3.  
    Via Twitter Rory Cellan-Jones Technology correspondent
    apple

    tweets: Amazing Apple quarter: record $18bn profit, 74m iPhones - most profitable product in history? But iPads disappoint

     
  4.  
    06:57: Greek euro exit? BBC Radio 4

    Lord Desai says most of the debt Greece owes is to public bodies such as the European Union and IMF. Greece cannot continue to pay off its debts for the next 20 years, he adds, and Greece and Germany have to decide whether they can afford for Greece to leave the eurozone. Anne Richardson of Aberdeen Asset Management points out £8bn of bank deposits have left Greek banks since November because investors see a so-called Grexit as having come "one step closer".

     
  5.  
    Via Twitter Stephanie McGovern Breakfast business reporter
    port

    tweets: Morning from the Port of Tyne - where today I'm talking about exports. #economy

     
  6.  
    06:44: Greek euro exit? BBC Radio 4
    Greece"s Prime Minister Alexis Tsipras is accompanied by associates

    Now that the Greek election has been won by Syriza, thoughts have begun to turn to negotiations over the country's debts. Greece could request to pay no interest on those debts for about five years, Lord Desai, economist and chairman of the Official Monetary and Financial Institutions Forum, tells Today. "That would save them about 4% of GDP," he says. But, he adds, there "really is no human way that Greece can pay the debt without ruining at least one generation's future."

     
  7.  
    06:31: GDP growth Radio 5 live

    Anne Richards, chief investment officer of Aberdeen Asset Management is the markets guest on Wake Up to Money. "You have to be a wee bit careful with quarterly numbers as they are subject to a lot of revision," she says. "The overall picture for the year was reasonably positive." Low construction growth was "a bit worrying." Strong sterling is a drag on GDP growth. Reliance on services rather than making things is also a challenge, she says. More engineers are needed.

     
  8.  
    06:20: Apple profit Radio 5 live
    The Apple logo

    The biggest quarterly profit ever for a company: $18bn, has been posted by phone pedlars Apple. Daniel Eran Dilger who writes for AppleInsider tells Wake Up to Money. Apple makes a load of margin from its high-end phones. They also make a lot when you break your power cable and have to splurge £65 on a new one, as presenter Adam Parsons learned earlier this week.

     
  9.  
    06:12: Services growth Radio 5 live

    More from Greg Madigan, the boss Subway UK and Ireland on Wake Up to Money. Hospitals, service stations and forecourts, or "non-traditional locations" are a big area of growth for the firm, he says. He used to be an air traffic controller, he adds.

     
  10.  
    06:01: Services growth Radio 5 live

    Services is what's propping up GDP growth, we learned yesterday. Greg Madigan, the boss Subway UK and Ireland is on Wake Up to Money. "The price of oil has come down putting more money in peoples pocket... one of the things that benefit from more discretionary spending is food retail," he says. They have 2,000 stores in the UK and Ireland now.

     
  11.  
    06:00: Howard Mustoe Business reporter

    Good morning. Keep your thoughts on today's news rolling in via email bizlivepage@bbc.co.uk and on twitter @BBCBusiness

     
  12.  
    06:00: Matthew West Business Reporter

    Morning everyone. In case you missed it EDF became the last of the "Big Six" energy suppliers to cut its gas prices last night. And US tech giant Apple reported the largest quarterly profit in corporate history. Today sees trading updates come from Brewin Dolphin, Johnson Matthey, Sage and Anglo American. We'll bring you those numbers and more as we get them.

     

Features

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.