HONG KONG - Asian markets mostly fell in edgy trading on Wednesday, after Wall Street ended broadly lower as a row looms about the US budget and debt ceiling.
With the deadline for a new budget agreement next Monday, investors are anxious that lawmakers on Capitol Hill reach an agreement that will avoid a shutdown of parts of the US economy.
However, with Republicans calling for cuts to President Barack Obama's healthcare law in the budget before they agree to any lifting of the country's borrowing limit, investors are preparing for a painful standoff.
Tokyo slipped 0.76 per cent, or 112.08 points, to 14,620.53 and Seoul lost 0.45 per cent, or 9.04 points, to 1,998.06. Shanghai closed down 0.41 per cent, or 9.02 points, at 2,198.52.
However, Sydney rose 0.80 per cent, or 41.7 points, to 5,275.9 and Hong Kong rose 0.13 per cent, or 30.59 points, to 23,209.63.
Global markets have been choppy since last Thursday's rallies following the US Federal Reserve's surprise decision to keep its massive stimulus programme in place for now.
Officials have warned that if a budget is not passed by the end of Monday some parts of the US government will have to be shut down, with hundreds of thousands of federal workers ordered to stay home with no pay.
Compounding the crisis is the Republicans' refusal to agree to lift the US debt ceiling from US$16.7 trillion - which must be achieved by mid-October - unless there are cuts to Obamacare.
Treasury Secretary Jacob Lew said: "There is no plan after we run out of borrowing authority that will give us the ability to meet all the obligations of the United States.
"It is not a line which you cross."
If the borrowing limit is not raised the US will not be able to service its debt obligations and will in turn default.
The row is similar to a standoff two years ago that saw Washington come perilously close to defaulting, sending global markets spiralling downwards and leading to a historic downgrade of the country's AAA debt rating by Standard & Poor's.