Asian stocks mixed, Wall St futures drop as US heads for shutdown ~ EconomyLens.com

Hong Kong (AFP) – Asian markets stuttered, US futures fell and gold hovered near record highs Wednesday after lawmakers in Washington failed to reach a deal to avert a government shutdown. The prospect of federal services being closed overshadowed optimism that the Federal Reserve will cut interest rates again, with the crisis possibly causing the postponement of key data used by the bank to decide on policy.

Democrats and Republicans have been unable to bridge their differences on funding the government beyond Tuesday — the end of the fiscal year — with both sides blaming each other. Senate Republicans tried to rubber-stamp a House-passed temporary funding patch but could not get the handful of Democratic votes required to send it to President Donald Trump’s desk. Democrats want to see hundreds of billions of dollars in healthcare spending for low-income households restored, which the Trump administration is likely to eliminate.

“We’ll probably have a shutdown,” the Republican president told reporters before the vote. Such a scenario would see non-essential operations grind to a halt, leaving hundreds of thousands of civil servants temporarily without pay, and payment of many social safety net benefits potentially disrupted. Trump threatened to punish Democrats and their voters during any stoppage by targeting progressive priorities and forcing mass public sector job cuts. “So we’d be laying off a lot of people that are going to be very affected,” he said. “And they’re Democrats, they’re going to be Democrats,” he told an event at the White House, adding that he would use the pause to “get rid of a lot of things we didn’t want, and they’d be Democrat things”.

While most shutdowns end after a short period with little effect on markets, investors remain concerned, particularly as it could prevent the release Friday of the key non-farm payrolls report — a crucial guide for the Fed on rate decisions. “Without (the report), the Fed would be forced to navigate October’s decision by starlight rather than compass, relying on smaller surveys and anecdotal signals,” wrote Stephen Innes at SPI Asset Management. “The October cut looks assured…but beyond that, the path becomes guesswork. Traders hate nothing more than an information vacuum. In its absence, every tick of secondary data looms larger than it should, amplifying volatility.”

Futures on all three main indexes in New York were in the red — with the Dow coming off a record — and Asian equities were mixed. Tokyo, Sydney, and Manila fell, while Singapore, Seoul, and Taipei rose. Gold, a go-to in times of turmoil and uncertainty, was hovering just below its record high of $3,871.72 owing to a weaker dollar, bets on lower borrowing costs, and worries about the impact of the shutdown.

In company news, Australian mining titan BHP fell more than one percent following reports that China’s state-run iron ore buyer told steelmakers to temporarily stop buying seagoing, dollar-denominated cargoes from the firm, as part of a pricing dispute. Australian Prime Minister Anthony Albanese called the move “disappointing”.