Pedestrians stand before a stock markets indicator board in Tokyo yesterday. Japanese stocks plunged to a two-week low for the day as the US government appeared headed for a partial shutdown. The benchmark Nikkei 225 Stock Average lost 304.27 points, or 2.06%.

AFP/Tokyo

Asian markets slumped yesterday 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%, or 304.27 points, to 14,455.80, Sydney shed 1.66%, or 88.2 points, to end at 5,218.9 and Seoul eased 0.74%, or 14.84 points, to 1,996.96. Hong Kong shed 1.50%, or 347.18 points, to close at 22,859.86.

But Shanghai rose 0.68%, 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 healthcare law.

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.

In other markets in Asia; Taipei fell 0.69%, or 56.81 points, to 8,173.87; Wellington eased 0.97%, or 46.29 points, to 4,736.39; while Manila slipped 2.95%, or 188.01 points, to 6,191.80.

India banks to industrials lead Sensex down before deficit data

India’s benchmark stock index fell to a three-week low yesterday, paring a monthly gain, before the release of deficit data and a potential US government shutdown. Banks and capital goods companies led the retreat, Bloomberg said.

ICICI Bank Ltd, the country’s second-biggest lender, slid 4.3%. Power-equipment producer Bharat Heavy Electricals Ltd lost 4.4% after jumping 6% last week. Oil & Natural Gas Corp, the country’s largest explorer, decreased for a third day. The rupee weakened 0.2%.

The S&P BSE Sensex dropped 1.8% to 19,379.77, the lowest close since September. 6. The current-account gap widened to $21.77bn in the three months ended June from $18.08bn, data released after trading ended showed. The median estimate in a Bloomberg survey was $23bn. The fiscal and current-account deficits have driven the rupee down 12% in 2013, and this month prompted Standard & Poor’s to say there is more than a one-in-three chance the country will lose its investment-grade rating within two years.

“There was nervousness due to US debt ceiling concern and the impending data on the current-account deficit,” said Kaushik Dani, a fund manager with Peerless Mutual Fund, which has about $725mn in assets.

ICICI tumbled to Rs883.65, the lowest close since September 4. State Bank of India dropped 1.6% to Rs1,614.90. HDFC Bank Ltd, the biggest lender by value, lost 2.6% to Rs593.05. The 13-member S&P BSE Bankex fell 2.8%. Mortgage lender Housing Development Finance Corp decreased 2.5% to Rs764.25.

Bharat Heavy Electricals slumped 4.4% to Rs137.40, paring the monthly climb to 15.5%. Oil & Natural Gas declined 2.4% to Rs267.85. Tata Steel Ltd lost 5.5% to Rs271.55, a one-month low. Reliance Industries Ltd, owner of the world’s largest refining complex, lost 2.1% to Rs822.40.

Investors are “jittery” as a US shutdown will affect fund flows to emerging markets, including India, DK Aggarwal, chairman of SMC Investments & Advisors Ltd in New Delhi, said in an interview yesterday.

Overseas funds bought a net $2.1bn of local shares this month, the first monthly net inflows since May, after the Reserve Bank of India Governor Raghuram Rajan announced plans to boost the rupee when he took charge on September 4 and the US Federal Reserve decided to keep stimulus. Inflows helped the rupee rebound 10% from a record low of 68.845 per dollar on August 28 and fuelled a 4.1% rally in the Sensex this month, the biggest since November.