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Asian shares mostly up on hopes of brief US shutdown

business Updated: Oct 02, 2013 08:21 IST

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Asian markets mostly rose on Wednesday following a positive lead from Wall Street, with investors betting US lawmakers will quickly reach an deal to bring an end to a government shutdown.

However, traders are nervous as Republicans and Democrats - already gridlocked over a budget bill - have just over two weeks to strike an agreement on raising the country's debt ceiling and avoid a painful default.

Tokyo dipped 0.45% as the dollar weakened but Sydney added 0.17% and Seoul added 0.18% while Hong Kong, which was closed Tuesday for a holiday, climbed 0.71%.

Shanghai and Mumbai were closed for public holidays.

A day after the US government shut down for the first time in 17 years, lawmakers remain at loggerheads over the budget, with Democrats refusing to give in to Republican cuts in President Barack Obama's flagship health law.

However, investors for now seem unruffled by the crisis, which has seen about 800,000 federal workers sent home and several agencies closed or put on skeleton staff.

Wall Street enjoyed healthy gains, with the Dow adding 0.41%, the S&P 500 advancing 0.80% and the Nasdaq rallying 1.23%.

US shares were also boosted by a better-than-expected jump in US manufacturing activity that indicated a sustained pick-up in the economy.

The Institute for Supply Management's purchasing managers index for manufacturing activity rose to 56.2% in September from 55.7% in August. Anything above 50 points to growth, while a figure below indicates contraction.

There's been "no sign of panic from investors but the crucial issue remains the debt ceiling deadline," Andrew Sullivan, head of sales trading at broker Kim Eng in Hong Kong, told Dow Jones Newswires.

The treasury has warned that it will not be able to pay its bills if the US borrowing limit is not raised by October 17, reviving memories of a stand-off in 2011 that sent global markets tumbling and led to a downgrade of Washington's AAA sovereign debt rating.

However, analyst Kathy Lien of BK Asset Management, said: "We believe the chance of default is less than 5% and a government shutdown won't last for more than two weeks."

On currency markets, the dollar slipped against the yen, although investors said the modest falls showed investors' faith that a deal will be reached.

The dollar bought 97.91 yen in early Asian trade against 97.94 yen in New York, while the euro fetched $1.3515 and 132.33 yen compared with $1.3527 and 132.51 yen.

Adding to greenback selling pressure is a growing expectation that the US Federal Reserve will hold off winding down its stimulus programme in the near future because of uncertainty caused by the shutdown.

Economists said there was little apparent impact from Tuesday's announcement of a hike in Japan's sales tax and economic stimulus package worth 5 trillion yen as they were well within expectations.

On oil markets, New York's main contract, West Texas Intermediate for delivery in November, was down 48 cents to $101.56, while Brent North Sea crude for November eased 37 cents to $107.57.

Gold cost $1,288.65 at 2:20am GMT compared with $1,330.77 on Tuesday.