Asian shares mostly higher despite US crisis

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.

Italy avoids another crisis

The president warned that investors should be worried about the latest row.

"This time's different. I think (investors) should be concerned," he said. "When you have a situation in which a faction is willing potentially to default on US government obligations, then we are in trouble."

The row hit Wall Street on Wednesday, with the Dow losing 0.39 per cent, the S&P 500 edging down 0.07 per cent and the tech-rich Nasdaq off 0.08 per cent.

Adding to the US selling pressure were fresh jobs data. Payrolls firm ADP said the private sector added 166,000 jobs in September, below expectations and too low to meaningfully reduce the jobless rate.

Rosengren, a supporter of the Fed's huge bond-buying, said that the flow of data the bank needs to make policy was being hampered owing to the fact so many federal agencies have been closed or scaled back.

"It is going to be much harder to get a gauge of what's happening with the economy" if the government stays shut, he said. "We will have data from the private sector but if we don't have good, reliable government statistics it will make it much harder to be able to take a gauge of what's going on."

Analysts have suggested that the crisis could force the Fed to hold off winding down its huge stimulus scheme, which helped buoy global markets for most of the year.

In currency trade, the dollar slipped against the euro after former premier Italian Silvio Berlusconi called off his bid to bring down Enrico Letta's government after key allies rebelled against him.

Markets had been concerned that the young administration would crumble, leading to fresh elections and more uncertainty in one of Europe's biggest economies.

Traders cheered the news and the euro climbed in Tokyo to $1.3605 -- around its highest since the start of February and well up from $1.3580 in New York late Wednesday. The single currency also fetched 132.82 yen against 132.21 yen in New York.

The dollar bought 97.62 yen, against 97.34 yen.

On oil markets, New York's main contract, West Texas Intermediate for delivery in November, fell 48 cents to $103.62 in afternoon trade. Brent North Sea crude for November eased 38 cents to $108.81.

Gold cost $1,315.52 at 0700 GMT compared with $1,292.80 on Wednesday.