"Asian shares and U.S. stock index futures fell and the safe-haven yen rose on Monday as a possible U.S. debt default edged closer after the failure of weekend talks in Washington, though expectations are that a last-minute compromise will be reached.
Adding to the gloom, data showed China's export growth unexpectedly fizzled in September, underscoring worries about flagging global demand, and annual consumer inflation quickened to a seven-month high.
MSCI's broadest index of Asia-Pacific shares outside Japan , which had hit a three-week high on Friday on hopes a U.S. deal was imminent, dropped 0.3 percent and China's CSI300 index slipped 0.2 percent.
Markets in Japan and Hong Kong are closed on Monday for public holidays.
U.S. stocks had risen strongly ahead of the weekend on hopes a deal to raise the $16.7 trillion federal borrowing limit was near. However, politicians remain at loggerheads as the October 17 deadline approaches and U.S. stock index futures fell 0.7 percent in Asian trade.
U.S. equity markets will trade on Monday, although some markets, such as the Treasury market, will be shut for the Columbus Day holiday. In Asia, U.S. Treasury futures edged up 4 ticks.
Failure to break the stalemate before Thursday's deadline would leave the world's biggest economy unable to pay its bills in the coming weeks, an outcome that is unthinkable for the global economy and financial markets. IMF chief Christine Lagarde warned of "massive disruption."
"Most likely, a solution will be found before, or be in the making, by October 17," analysts at Nomura wrote in a client note.
"The tail risk comes into play if there is no clear framework for a solution by October 17. Entering this tail would see risk jump in terms of funding market stress and risk assets more broadly."
Source: Reuters
