Asian shares down as US faces shutdown over budget row

PHOTO: Asian shares down as US faces shutdown over budget row

HONG KONG - Asian markets slumped on Monday as the US government edged towards a shutdown over a budget battle.

The face-off in Washington also sent the dollar lower, while the euro suffered selling pressure from a crisis in Italy that has left the country's five-month-old government on the brink of collapse.

Tokyo fell 2.06 per cent, or 304.27 points, to 14,455.80, Sydney shed 1.66 per cent, or 88.2 points, to end at 5,218.9 and Seoul eased 0.74 per cent, or 14.84 points, to 1,996.96. Hong Kong shed 1.50 per cent, or 347.18 points, to close at 22,859.86.

But Shanghai rose 0.68 per cent, or 14.64 points, to close at 2,174.67 after a survey by banking giant HSBC showed Chinese manufacturing expanded further in September.

Traders have been spooked by the latest row on Capitol Hill, with the US government on the brink of shutting down after the House of Representatives approved a Republican bill seeking to delay President Barack Obama's health care law.

Lawmakers now have until midnight Monday to reach an agreement to keep the government open, but analysts say the chances of a breakthrough are slim.

Obama has threatened to veto any bill that undercuts his sweeping health overhaul, while Democratic Senate Majority Leader Harry Reid says his chamber will reject the bill.

Adding to the crisis is a deadline to raise the country's borrowing limit, which comes up in mid-October. With Republicans determined not to raise the debt ceiling unless Obama gives way on the health bill, there are fears that Washington will run out of cash and default on its repayments.

"Things are far from the 'panic stage', but they don't have to be for investors to be spooked by the apparent intractability of the US political deadlock," said Tachibana Securities market analyst Kenichi Hirano.

The impasse weighed on the dollar Monday, with the unit weakening to 97.87 yen from 98.24 yen in New York Friday.

The euro fell to $1.3500 and 132.16 yen compared with $1.3519 and 132.88 yen.

The single currency suffered selling pressure after Italian Prime Minister Enrico Letta called a vote of confidence in his left-right government, as former premier Silvio Berlusconi pulled his party's ministers out of the coalition.

President Giorgio Napolitano will have to mediate to find a way out of the latest political impasse, and has said he would dissolve parliament, triggering new elections, only "if there are no other solutions".

On oil markets New York's main contract, West Texas Intermediate for delivery in November, fell $1.35 to $101.52 in afternoon trade. Brent North Sea crude for November was down 95 cents to $107.68.

Gold cost $1,340.86 at 0805 GMT compared with $1,324.60 on Friday.

In other markets:

- Taipei fell 0.69 per cent, or 56.81 points, to 8,173.87.

Taiwan Semiconductor Manufacturing Co. shed 2.43 per cent to Tw$100.5 while Hon Hai Precision was 0.52 per cent lower at Tw$75.9.

- Wellington eased 0.97 per cent, or 46.29 points, to 4,736.39.

Telecom fell 1.9 per cent to NZ$2.33 and Warehouse Group was off 2.92 per cent at NZ$3.66, while Air New Zealand rose 0.33 per cent to NZ$1.52.

- Manila slipped 2.95 per cent, or 188.01 points, to 6,191.80.

Alliance Global Group fell six per cent to 23.50 pesos while SM Investments dropped 4.41 per cent to 7.80 pesos.