* No major progress in U.S. budget standoff
* Dollar weakens against yen, euro
* Nikkei extends last week's 5 pct tumble, Asian shares fall
* European shares set to open lower
By Dominic Lau
TOKYO, Oct 7 Asian shares, oil prices and the
dollar came under pressure on Monday as politicians in
Washington showed no signs of making progress to resolve the
U.S. budget standoff, while safe-haven gold inched higher.
Financial bookmakers expected European shares
to follow Asia lower and open down between 0.4
and 0.5 percent.
Democrats and Republicans remained far apart on ending the
government shutdown, let alone reaching a deal on the U.S.
borrowing limit by Oct. 17 to avoid an unprecedented default.
Republican House Speaker John Boehner vowed not to raise the
debt ceiling without a "serious conversation" about what is
driving the debt, while Democrats said it was irresponsible and
reckless to raise the possibility of a default.
The comments appeared to mark a hardening stance since late
last week when Boehner was reported to have told Republicans
privately that he would work to avoid default, even if it meant
relying on the votes of Democrats, as he did in August 2011.
The U.S. Standard & Poor's 500 e-mini futures shed
0.6 percent in Asian trade on Monday, pointing to further
weakness on Wall Street later in the day. The S&P 500 index
ended down 0.1 percent last week.
U.S. Treasury futures rose 5-1/2 ticks.
Selling of riskier assets has been orderly so far, but
investors expect volatility to increase if the shutdown
continues as the Oct 17 deadline gets closer.
"As the days tick by and the U.S. government's cash
gradually starts to run out, the stakes will rise considerably,"
analysts at ANZ said in a note.
MSCI's broadest index of Asia-Pacific shares outside Japan
fell 0.6 percent. Its 12-month forward
price-to-earnings ratio stood at 11.8 as of last week, below a
10-year average of 12.4, Thomson Reuters Datastream data showed.
Japan's Nikkei share average dropped 1 percent,
hitting a one-month low and extending last week's 5 percent
tumble - its biggest weekly fall since early August.
NERVE TESTING TIME AHEAD
"A higher risk of a U.S. sovereign default would lead to a
flight to liquidity and, ironically, a stronger U.S. dollar,
except against the most liquid/safest-haven ones: euro, yen,
sterling and Swiss franc," analysts at Barclays Capitals wrote
in a note.
"That is not to say we expect a breach of the ceiling, and
continue to expect that a resolution will be found, despite the
The dollar slipped 0.3 percent to 97.15 yen, giving
up its gains on Friday to snap a five-day losing run against the
The greenback was down 0.1 percent against the euro
at $1.3568. Against a basket of major currencies, the dollar
eased 0.1 percent to be within striking distance of an
eight-month trough hit last week.
Brent crude eased 0.3 percent to around $109.10 a
barrel, after gaining 0.8 percent last week to end a three-week
Gold, a safe-haven investment, rose 0.3 percent to
about $1,314 an ounce.
"If we don't see any progress till the 17th, I think we will
see gold spike to $1,400," said Brian Lan, managing director of
GoldSilver Central Pte Ltd in Singapore.