5:00 PM Sydney – Australian stocks and indexes closed lower and markets across Asia shifted focus to domestic earnings. Central banks in Asia prepare for a scenario where U.S. politicians may fail to lift debt ceiling and set off uncontrollable chain of events.
Australian stocks traded lower on the back of uncertainty in the largest U.S. economy and the debt default date looms in less than ten days.
Republican leaders in U.S. Congress are supporting a view that the U.S. can wait as long as November 1 to decide what to do with the budget and whether to increase debt ceiling or not.
Increasingly a vocal minority of Republicans are floating proposals that may force the government to spend what it receives in revenue on a weekly basis and that may lead to a technical default on the interest payment.
U.S. has the largest debt in the world totaling $16.7 trillion and Congress has raised the debt ceiling 78 times since 1960.
Increasing the debt ceiling does not increase the U.S. government debt, it simply allows the government to raise money to pay its existing bills and avoid a default. The interest on debt alone due at the end of October is $6 billion and if the government fails to pay the default will set off a chain of uncontrollable events around the world.
The ASX 200 index declined 4 points to 5,153. In trading. 609 million shares changed hands worth $3.5 billion.
Australian dollar fetched 94.36 U.S. cents and gold closed at $1,318.50 and immediate month future of crude oil increased 46 cents to $103.49.
Stocks in Review
Worleyparsons Limited plunged as much as 6% and closed down 2.9% to $22.10 and the resource company said earnings in the first-half will be below expectations on weaker than expected order flow.
OceanGold Corporation declined 4.3% and the company said it agreed to acquire Canada based Pacific Rim Mining Corp for $10.4 million.
FKP Property Group increased 1.65% to $1.54 said the sale of two properties will help company to pay down its debt. The company agreed to sell 399 Lonsdale Street, Melbourne building for $31.5 million and a group of industrial land plots in Mackay for $25 million.
Newcrest Mining Limited announced management changes and appointed Peter Hay to replace Don Mercer as chairman. In addition, the company also appointed Rio Tinto executive Sandeep Biswas as its new Chief Operating Officer.
Virgin Australia gained 1.2% and the company signed a five-year telecom service agreement of $60 million with Optus.