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Stocks on Wall Street fell back after US President Donald Trump said he may shut down the US Government if he does not get funding to build a wall on the US-Mexico border.
Markets at 7:30am (AEST):
- ASX SPI 200 futures +0.1pc at 5,704, ASX 200 (Wednesday close) -0.4pc at 5,737
- AUD: 79.04 US cents, 61.75 British pence, 66.93 euro cents, 86.15 Japanese yen, NZ$1.09
- US: Dow Jones -0.4pc at 21,812, S&P 500 -0.3pc at 2,444, Nasdaq -0.3pc at 6,278
- Europe: FTSE flat at 7,388, DAX -0.5pc at 12,175, Euro Stoxx 50 -0.5pc at 3,439
- Commodities: Brent crude +1.12pc at $US52.49/barrel, spot gold +0.4pc at $US1,290/ounce, iron ore -2.3pc at $US77.82/tonne
Mr Trump also again warned that he may terminate NAFTA, the North American Free Trade Agreement, at some point.
He made the comments at a rally of supporters in Phoenix, Arizona, after initial talks with Mexico and Canada over the weekend failed to resolve differences.
"If we have to close down our Government, we're building that wall," he said.
"We're going to have our wall. The American people voted for immigration control. We're going to get that wall."
US House of Representatives speaker Paul Ryan said a government shutdown was unnecessary and his comments briefly slowed the market sell-off.
US debt ceiling 'game of chicken'
Investors are also worried that time is running out for the US to raise its debt ceiling so it does not default on debts.
Wall Street analysts believe Congress has just 12 working days when it returns from the summer recess on September 5 to increase the ceiling.
Credit ratings agency Fitch said it could potentially downgrade its AAA credit rating on the US Government if the debt ceiling is not raised in a timely manner.
It said it was reviewing the US credit rating "with potentially negative implications."
But Fitch said a government shutdown would not have a direct impact on the AAA credit rating.
ANZ analyst Daniel Hynes said a game of chicken was beckoning in the US Congress.
"A US Government shutdown would be embarrassing, certainly, but not raising the debt ceiling by September 30 could result in a technical US bond default — and the two bills could yet be lumped together," he cautioned.
"Wall aside, Trump's problem is that, although the Republicans control both houses, fiscal hardliners in his party will want broad spending cuts attached to the bill, while moderates in insecure seats most certainly will not."
Investors are also waiting for a speech by Federal Reserve boss Janet Yellen to a meeting of global central bankers at Jackson Hole, Wyoming tomorrow.
Retail woes drag on stocks
On the market, retailers and advertising firms slumped on concerns about their earnings.
Disappointing profit results and outlook from home improvement retailer Lowe's Companies weighed on the market.
It fell nearly 4 per cent to $US73.01.
Ride sharing firm Uber Technologies narrowed its loss in the second quarter to $US645 million, despite the scandals engulfing the company.
It made $US1.75 billion in adjusted net revenue over the quarter, up 17 per cent from the previous quarter.
Uber's co-founder, Travis Kalanick, resigned as chief executive in June over a string of scandals, including sexual harassment allegations, and he also stepped down from the board.
Investors bought gold and Treasury bonds as they looked for safe havens.
The S&P 500 Index fell back after two days of gains.
The volatility index, the VIX, jumped 8 per cent.
Economic data showed that sales of new family homes in the US fell by more than 9 percent in July to the lowest in seven months.
The US manufacturing industry weakened slightly but the services industry expanded.
Pound hits eight-year low against the euro
European markets were mainly in the red although the FTSE 100 in London ended flat.
The euro rose after data showed the manufacturing industry in the eurozone, boosted by France and Germany, was at the best in six-and-a-half years.
Comments by European Central Bank president Mario Draghi had little impact on the markets.
He defended quantitative easing from the naysayers, including Germany.
Mr Draghi will also be speaking at Jackson Hole on Friday.
But the pound fell to a new eight-year low against the euro on worries about Britain's departure from the European Union.
In futures trade, the ASX SPI 200 index defied the overnight falls after the lower greenback boosted metals prices.
Oil prices rose on a drop in US stockpiles.
Spot gold rose on more political tension in the US.
The Australian dollar has come off its overnight low to around 79 US cents.
Topics: stockmarket, currency, company-news, economic-trends, australia
First posted