By Robb M. Stewart
MELBOURNE, Australia--Australian equities edged lower Tuesday as
lawmakers in the U.S. failed to meet a deadline for funding the
government and Australia's central bank left interest rates on hold
amid signs the economy is picking up.
With two straight days of declines the market is almost back to
where it was three weeks ago, eating into strong gains in recent
weeks as investors ponder the implications of a partial shutdown of
the U.S. government after Democrats and Republicans couldn't break
an impasse over spending and health-care law.
"The shutdown is official and we have to just wait until U.S.
leaders can find middle ground without a defined timeframe," said
Stan Shamu, a market strategist at IG in Melbourne.
The first government shutdown in 17 years came on the heels of a
raft of economic data showing the Australian economic is
recovering, with consumers spending and manufacturing expanding for
the first time in more than two years. That supported the decision
by the Reserve Bank to continue to sit tight with its benchmark
rate at a record low 2.5%.
"Certainly there is no imperative to cut rates again, although
the Reserve Bank has plenty of ammunition at its disposal should it
need to cut rates again," said Craig James, chief economist at
CommSec. "The economy has turned the corner. Provided the political
wrangling in the U.S. doesn't drag on, the outlook is
encouraging."
The S&P/ASX 200 finished 0.2% lower at 5206.8, having
seesawed around neutral for much of the day as investors watched
the budget wrangling in Washington.
The Australian currency, lifted by a U.S. dollar that fell with
the government shutdown, strengthened after the Reserve Bank's
policy meeting. At 0700 GMT, the Australian dollar traded at
US$0.9412 compared with US$0.9305 late Monday in Asia.
"The next direction of the local bourse and currency will be
dependent on when and whether the budget tug-of-wall will be
resolved in Washington," said Betty Lam, a sales trader at CMC
Markets.
Resources stocks were among the day's biggest losers, with
heavyweight BHP Billiton down 0.7% and Rio Tinto 1.1% lower. Gold
producer Newcrest Mining fell 2.6%.
Dividend-rich banks bucked the move lower, with ANZ,
Commonwealth Bank and National Australia Bank between 0.2% and 0.3%
higher.
Write to Robb M. Stewart at robb.stewart@wsj.com
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