Asian shares fall, yen firms as US debt deadline nears
Credit: Reuters/Brendan McDermid
1 of 9. Traders work on the floor of the New York Stock Exchange August 28, 2013.
Adding to the gloom, data on Saturday showed China's export growth unexpectedly fizzled in September, underscoring worries about flagging global demand.
U.S. stock index futures fell 0.7 percent in early trade. If the losses are sustained, it indicates that Wall Street would open lower later on Monday.
U.S. Treasury futures edged up 3-1/2 ticks, though the cash market will be shut due to the Columbus Day holiday. Markets in Japan and Hong Kong are also closed on Monday for public holidays.
U.S. stocks .SPX had risen strongly ahead of the weekend on hopes a deal to raise the $16.7 trillion federal borrowing limit was near. However, U.S. politicians remain at loggerheads as the October 17 deadline approaches.
Failure to break the stalemate before Thursday's deadline would leave the world's biggest economy unable to pay its bills in the coming weeks, an outcome that is unthinkable for global financial markets.
Still, trading has remained relatively calm as many analysts expect Republicans and Democrats to strike a last-minute deal, believing U.S. politicians would want to avoid the dire consequences of a default.
'Most likely, a solution will be found before, or be in the making, by October 17,' analysts at Nomura wrote in a client note.
'The tail risk comes into play if there is no clear framework for a solution by October 17. Entering this tail would see risk jump in terms of funding market stress and risk assets more broadly.'
Some financial institutions have reduced the use of Treasury bills as collateral for trades as the deadline gets closer. Hong Kong's securities exchange is applying a bigger discount on U.S. Treasuries used as margin collateral.
UNCERTAINTY AHEAD
The failure of the weekend talks in Washington saw investors react by seeking safety in the yen.
The dollar fell 0.3 percent to 98.30 yen and the euro dipped 0.1 percent to 133.30 yen. The Australian dollar eased 0.1 percent to 92.82 yen.
The dollar index .DXY, which tracks the greenback against a basket of major currencies, was a touch softer.
In commodity markets, gold held steady at $1,271.6 an ounce after losing 2.9 percent last week.
Brent crude dipped 0.3 percent to just below $111 a barrel on concerns that the U.S. debt standoff and slower growth in China would crimp demand.
'China still faces significant external headwinds while a recovery in domestic demand is lifting import growth,' HSBC said in a note.
'Beijing should keep its accommodative policy and steer structural reforms to sustain a recovery driven by domestic demand,' it added.
(Editing by John Mair)
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