US stock markets have closed deep in the red as politicians in Washington remained deadlocked over a deal to reopen the government and avoid default on its debts.
The Dow Jones Industrial Average on Tuesday shed 133.25 points (0.87 per cent) at 15,168.01.
The broader S&P 500 fell 12.08 (0.71 per cent) to 1,698.06, and the Nasdaq Composite lost 21.26 (0.56 per cent) at 3,794.01.
Both the Dow and the S&P 500 broke four-day winning streaks.
Stocks extended their slide in the afternoon after early hopes for a breakthrough in the divided Congress had evaporated.
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On the 15th day of a US federal government shutdown, the result of Congress’s failure to approve a budget for the 2014 fiscal year that began on October 1, Democrats and Republicans remained at loggerheads over the budget and raising the borrowing limit.
The US Treasury has warned that if Congress fails to lift the $US17.6 trillion debt ceiling by Thursday, it will lose its ability to borrow and could run out of cash to pay all its obligations.
“We’re far from a deal at this point,” White House spokesman Jay Carney admitted.
The Australian dollar has backed away from its four-month high as optimism about a resolution to the US budget crisis waned.
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Early Wednesday, the local unit was trading at 95.11 US cents, down from 95.33 cents on Tuesday.
The currency hit a four-month high of 95.40 US cents during local trade on Tuesday on expectations an agreement would be reached on raising the US government’s debt ceiling.
OM Financial senior client adviser Stuart Ive said risk currencies and US stock markets fell in overnight trade after both chambers of the Congress failed to even vote on raising the debt ceiling.
“The lack of progress in the US on any settlement to their debt ceiling has really taken the edge off the markets and we’ve seen the Aussie dollar fall,” he said.
“Markets are very subdued at the moment. We’re just all waiting for some progress.”
Ive said investors would stay focused on any developments or progress in reaching a deal on the US government’s borrowing limit.
Meanwhile, Reserve Bank of Australia governor Glenn Stevens will give a speech in Sydney on Friday, which, Ive said, hopefully would give some guidance on the interest rate outlook.
