The Japan Times - Gold hits record, Wall St futures drop as US shutdown begins

The prospect of services in the United States being closed overshadowed optimism the Federal Reserve will cut interest rates again.

Democrats and Republicans remain at loggerheads on funding the government beyond Tuesday -- the end of the fiscal year -- with both sides blaming each other.

Senate Republicans tried to rubber-stamp a House-passed temporary funding patch, but could not get the handful of Democratic votes required to send it to President Donald Trump to sign off.

Democrats want to see hundreds of billions of dollars in healthcare spending for low-income households restored, which the Trump administration is likely to eliminate.

The closure will see non-essential operations halted, leaving hundreds of thousands of civil servants temporarily unpaid, and many social safety net benefit payments potentially disrupted.

Trump threatened to punish Democrats during any stoppage by targeting progressive priorities and forcing mass public sector job cuts.

"So we'd be laying off a lot of people that are going to be very affected," he said.

"And they're Democrats, they're going to be Democrats," the president told an event at the White House, adding that he would use the pause to "get rid of a lot of things we didn't want, and they'd be Democrat things".

Republican House Speaker Mike Johnson wrote on X that "Democrats have officially voted to CLOSE the government".

Democratic leaders Chuck Schumer and Hakeem Jeffries said in a joint statement their party remained "ready to find a bipartisan path forward to reopen the government in a way that lowers costs and addresses the Republican healthcare crisis".

While most shutdowns end after a short period with little effect on markets, investors remain concerned, particularly as it could prevent the release Friday of the key non-farm payrolls report -- a crucial guide for the Fed on rate decisions.

Still, Pepperstone's Michael Brown wrote: "I remain strongly of the view that (investors) should continue to look through the political noise as, in the grand scheme of things, the expiration of federal funding doesn't make especially much difference.

"Chiefly, this is because we all know that, sooner or later, a deal will be cut, the government will re-open, and any economic data that was delayed... will be released in due course."

Safe-haven gold hit a new peak of $3,875.53 on worries about the shutdown as well as a weaker dollar and bets on lower borrowing costs.

Futures on all three main indexes in New York were in the red -- with the Dow coming off a record.

However, Asian equities held up, with Singapore, Seoul, Wellington, Taipei, Manila, Mumbai, Bangkok and Jakarta all in positive territory along with London.

Tokyo sank with Paris and Frankfurt while Sydney was barely moved.

Hong Kong and Shanghai were closed for holidays.

The dollar retreated against its peers owing to concerns caused by the shutdown.

India's rupee also made small inroads as the country's central bank decided against cutting interest rates, despite inflation remaining low, but the unit continued to hover around record lows against the greenback.

The South Asian currency has been hit by concerns over stalled trade talks with Trump that will soften painful tariffs, while Washington's strict immigration measures have added to worries.

The two sides remain in talks despite sharp disagreements over agricultural trade and New Delhi's purchases of Russian oil.

In company news, Australian mining titan BHP fell 2.5 percent following reports China had told steelmakers to temporarily stop buying seagoing, dollar-denominated cargoes from the firm, as part of a pricing dispute.

- Key figures at around 0715 GMT -

Tokyo - Nikkei 225: DOWN 0.9 percent at 44,550.85 (close)

London - FTSE 100: UP 0.2 percent at 9,366.15

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

Euro/dollar: UP at $1.1768 from $1.1739 on Tuesday

Pound/dollar: DOWN at $1.3468 from $1.3448

Dollar/yen: UP at 147.21 yen from 147.86 yen

Euro/pound: UP at 87.37 pence from 87.29 pence

West Texas Intermediate: UP 0.4 percent at $62.59 per barrel

Brent North Sea Crude: UP 0.4 percent at $66.28 per barrel

New York - Dow: UP 0.2 percent at 46,397.89 (close)

M.Yamazaki--JT