Asian markets fall as US shutdown nears
- 30 September 2013
- From the section Business
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.
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.
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.
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.