US President Barack Obama and Vice-president Joe Biden vow
not to give in to Republican demands. Photo by Reuters.
Transtasman and Asian financial markets will be in
something of a vacuum today as the political standoff in the
United States drags on for another day.
US markets will remain closed until late tonight, leaving the
transtasman and Asian markets without direction.
Craigs Investment Partners broker Chris Timms said yesterday
yields were still good for investors in the NZX-50 but he
expected a volatile week if US President Barack Obama and the
House Republicans continued their impasse on funding the
Also of concern was the Republican threat to link the budget
talks through to the debt ceiling which expires on October
17. The US needed to increase its $US16.7 trillion ($NZ20.1
trillion) debt ceiling to prevent the world's largest economy
defaulting on its debts.
''Everyone is taking such a hard line in the US. The
Republicans are holding Obama to ransom - they have him over
a barrel. From outside, we are looking at this ridiculous
situation and wondering how they got there.
The president has to deal with his opponents to allow the
budget to pass and the debt ceiling to increase. It's hard to
understand how that happens,'' Mr Timms said.
It appeared from New Zealand that a minority group of
Republicans - the Tea Party - was holding the strongest hand
in the negotiations.
Any suggestion of ongoing uncertainty would spook the
markets. There was likely to be a sell-down in New Zealand
and Australia as Americans took their money out of riskier
markets and reinvested at home, he said.
The standoff, which began on October 1, shut all but
essential government operations and is the latest in a series
of budget fights between Mr Obama and Republicans.
In the past, Republicans have insisted on spending cuts as
the price for budget deals or lifting the government debt
limit. Their current stand is aimed at derailing the
president's landmark healthcare reform law to expand health
insurance to millions without coverage.
Republicans argue the law is a massive government intrusion
into private medicine which will cause insurance premiums to
rise, put people out of work and eventually lead to
socialised medicine. They have refused to pass a funding bill
without attaching measures to undercut the law known as
Mr Obama and his fellow Democrats have vowed to make no
concessions on the funding bill or on raising the debt
The only sign of agreement over the weekend was the Democrats
and Republicans agreeing to retroactively pay 800,000
furloughed federal employees once the Government reopened.