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| US shares close lower on threat of a shutdown | US shares close lower on threat of a shutdown |
| (35 minutes later) | |
| Shares in New York closed lower as the prospect of a shutdown of some US government activities looks increasingly likely. | Shares in New York closed lower as the prospect of a shutdown of some US government activities looks increasingly likely. |
| The Dow Jones closed down 128 points, or 0.84%, while the S&P 500 and Nasdaq fell by 0.60% and 0.27% respectively. | The Dow Jones closed down 128 points, or 0.84%, while the S&P 500 and Nasdaq fell by 0.60% and 0.27% respectively. |
| However, all three indexes were up for the month, buoyed by a strengthening US economic recovery. | However, all three indexes were up for the month, buoyed by a strengthening US economic recovery. |
| The US needs to agree a new spending bill before the financial year ends at midnight on Tuesday. | The US needs to agree a new spending bill before the financial year ends at midnight on Tuesday. |
| But political divisions have resulted in a stalemate and there are worries over the economic impact of a shutdown of the US government. | But political divisions have resulted in a stalemate and there are worries over the economic impact of a shutdown of the US government. |
| "The shutdown will have a very real economic impact on very real people right away," said US president Barack Obama late on Monday, after it seemed as if negotiations had all but broken down. | |
| If the government does shut down on 1 October, as many as a third of its 2.1 million employees are expected to stop work - with no guarantee of back pay once the deadlock is resolved. | If the government does shut down on 1 October, as many as a third of its 2.1 million employees are expected to stop work - with no guarantee of back pay once the deadlock is resolved. |
| National parks and Washington's Smithsonian museums would close, pension and veterans' benefit cheques would be delayed, and visa and passport applications would be stymied. | National parks and Washington's Smithsonian museums would close, pension and veterans' benefit cheques would be delayed, and visa and passport applications would be stymied. |
| Programmes deemed essential, such as air traffic control and food inspections, would continue. | Programmes deemed essential, such as air traffic control and food inspections, would continue. |
| Unemployment report | Unemployment report |
| Investors will be keen to know if Friday's job report will be released. | Investors will be keen to know if Friday's job report will be released. |
| The monthly non-farm payrolls report is one of the most closely watched pieces of US economic data. | The monthly non-farm payrolls report is one of the most closely watched pieces of US economic data. |
| Employees at the Labor Department's Bureau of Labor Statistics (BLS), who prepare the report, would be among those who would stood down in the event of a shutdown. | Employees at the Labor Department's Bureau of Labor Statistics (BLS), who prepare the report, would be among those who would stood down in the event of a shutdown. |
| "All survey and other programme operations will cease and the public website will not be updated," said Erica Groshen, commissioner of the BLS, said in a memo published on the department's website. | |
| Deadlock | Deadlock |
| Republicans are targeting President Barack Obama's healthcare law, popularly known as Obamacare. | Republicans are targeting President Barack Obama's healthcare law, popularly known as Obamacare. |
| Early on Sunday, the Republican-run House of Representatives passed an amended version of the Senate spending bill that removed funding for the healthcare law. | Early on Sunday, the Republican-run House of Representatives passed an amended version of the Senate spending bill that removed funding for the healthcare law. |
| That bill was roundly rejected by the US Senate as soon as members returned on Monday. | That bill was roundly rejected by the US Senate as soon as members returned on Monday. |
| The Democratic-led Senate voted 54-46 against the bill. | The Democratic-led Senate voted 54-46 against the bill. |
| "It will be a Republican government shutdown, pure and simple," said Senate Majority Leader Harry Reid, Democrat of Nevada, referring to the Republicans as "bullies". | "It will be a Republican government shutdown, pure and simple," said Senate Majority Leader Harry Reid, Democrat of Nevada, referring to the Republicans as "bullies". |
| "We are not going to negotiate on this. We have done everything we can to be fair and reasonable." | "We are not going to negotiate on this. We have done everything we can to be fair and reasonable." |
| After the vote, Republican House Speaker John Boehner told reporters his chamber would re-evaluate the proposal, but it remained unclear if Mr Boehner could convince members of his party to change their position in any meaningful way. | After the vote, Republican House Speaker John Boehner told reporters his chamber would re-evaluate the proposal, but it remained unclear if Mr Boehner could convince members of his party to change their position in any meaningful way. |
| Mr Obama echoed Mr Reid's concerns, saying that "one faction of one party in one house of Congress in one branch of government doesn't get to shut down the government". | |
| Uncertain Italy | Uncertain Italy |
| Meanwhile European financial markets have been upset by a deepening political crisis in Italy. | Meanwhile European financial markets have been upset by a deepening political crisis in Italy. |
| Italian shares closed down 1.2% and the euro fell to the lowest level since June against the Swiss Franc. | Italian shares closed down 1.2% and the euro fell to the lowest level since June against the Swiss Franc. |
| Italy's 10-year bond yield - an indication of how much the government has to pay to borrow money - rose as high as 4.66%, the highest level in more than three months. | Italy's 10-year bond yield - an indication of how much the government has to pay to borrow money - rose as high as 4.66%, the highest level in more than three months. |
| Prime Minister Enrico Letta plans to hold a confidence vote on Wednesday, to seek the backing of Italy's parliament. | Prime Minister Enrico Letta plans to hold a confidence vote on Wednesday, to seek the backing of Italy's parliament. |
| He was forced to make that move after five ministers from Silvio Berlusconi's party stepped down at the weekend. | He was forced to make that move after five ministers from Silvio Berlusconi's party stepped down at the weekend. |
| But those ministers have now given mixed signals as to whether they are actually leaving the government. | But those ministers have now given mixed signals as to whether they are actually leaving the government. |
| The crisis follows weeks of worsening ties between Mr Berlusconi's party and Mr Letta's grouping. | The crisis follows weeks of worsening ties between Mr Berlusconi's party and Mr Letta's grouping. |
| Mr Berlusconi's People of Freedom (PDL) objects to a planned increase in sales tax, which is part of a wider government policy to reduce big public debts. | Mr Berlusconi's People of Freedom (PDL) objects to a planned increase in sales tax, which is part of a wider government policy to reduce big public debts. |
| 'Fear of the unknown' | 'Fear of the unknown' |
| Earlier on Monday, Worries over the US shutdown had hit Asian shares. | Earlier on Monday, Worries over the US shutdown had hit Asian shares. |
| Japan's Nikkei 225 index closed 2% lower, Hong Kong's Hang Seng was down 1.5%, Australia's ASX fell 1.7%, while South Korea's Kospi shed 0.7% | Japan's Nikkei 225 index closed 2% lower, Hong Kong's Hang Seng was down 1.5%, Australia's ASX fell 1.7%, while South Korea's Kospi shed 0.7% |
| "It is the fear of the unknown," said David Kuo of financial website the Motley Fool. "No one knows what is really going to happen and markets don't like uncertainty." | "It is the fear of the unknown," said David Kuo of financial website the Motley Fool. "No one knows what is really going to happen and markets don't like uncertainty." |
| "There is likely to be some reduction in US government spending, but we don't know what areas are going to be affected. | "There is likely to be some reduction in US government spending, but we don't know what areas are going to be affected. |
| "Until that is resolved, we are likely to see volatility in the markets," he added. | "Until that is resolved, we are likely to see volatility in the markets," he added. |