As investors prepare for the increasing likelihood of a political stalemate in Washington, many argue a shutdown should be short-lived, but how will markets take the news?
U.S. politicians have been unable to reach an agreement on budget spending thus far. They face a deadline of midnight on Monday, after which the government will shut down, meaning that 800,000 federal employees would be put on temporary leave. Most analysts agree that a shutdown now looks imminent, but acknowledge that this has happened before and is unlikely to last long.
Risk aversion has piqued in response to the potential shutdown. In early Asian trade on Monday, the Nikkei fell 2 percent, while Australia’s S&P ASX 200 and the South Korea’s Kospi lost nearly 1 percent. This followed declines on U.S. stock markets, as both the Dow and the S&P 500 declined over 1 percent last week.
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