HONG KONG, Hong Kong - Asian markets mostly rose on Thursday but eyes remained fixed on the budget gridlock in Washington that has shut down the federal government as President Barack Obama warned Wall Street over the crisis.
Investors appeared to brush off a breakdown in talks between Obama and leaders of the Republican and Democratic parties on the spending freeze, which threatens to trigger a debt default if it is not resolved within two weeks.
The euro got a boost -- hitting an eight-month high against the dollar -- after Italy averted a political crisis, while the European central bank reasserted its determination to prevent a rise in interbank interest rates.
Tokyo ended flat, edging down 13.24 points to 14,157.25, although a weaker yen pared earlier losses, while Sydney closed 0.37 per cent, or 19.3 points, higher at 5,234.9 and Hong Kong added 0.80 per cent in the afternoon. Taipei added 1.73 per cent, or 142.50 points, to 8,359.02 and Wellington closed flat, edging up 1.35 points to 4,770.22.
Shanghai and Seoul were closed for public holidays.
There was some comfort for regional economies in comments from Federal Reserve Bank of Boston President Eric Rosengren, who indicated the central bank may have to delay its stimulus wind-down because of the impasse.
Obama met for more than an hour with the heads of both parties at the White House but there was no sign of any progress in ending a dispute that threatens to hurt a fragile economic recovery.
Senate Democrats have repeatedly blocked Republican House funding bills that seek to dismantle or delay Obama's signature healthcare reform bill, widely known as "Obamacare".
Obama said in an interview with CNBC that he would not negotiate on budget matters until Republicans had passed a short-term bill to fund the government and acted to raise the $16.7 trillion dollar US debt ceiling.
If the borrowing limit is not increased by mid-October the United States will not be able to pay its bills or service its debts, and in turn will suffer a default likely to have a devastating effect on the global economy.
A similar Republican-Democrat face-off in 2011 sent world markets tumbling and led to a downgrade of Washington's AAA sovereign debt rating.