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Asian stock markets mostly lower, weighed down by US debt concerns as deadline looms
HONG KONG (AP) ' Asian stock markets wallowed Wednesday as the U.S. government edged closer to defaulting after lawmakers in the world's biggest economy failed to make significant progress on raising its borrowing limit.
Oil dropped to near $99 a barrel. The dollar weakened against the yen but held steady against the euro.
U.S. Republican leaders had promised a vote on Wednesday in the House of Representatives on a plan to increase the $14.3 trillion debt limit and avoid America's first-ever default. But the vote was put off until at least Thursday.
Investors are concerned that time is running out to break the deadlock over raising the borrowing limit as the Aug. 2 deadline looms. If a deal is not reached by then, the government won't have enough cash to pay all its bills and could default on its debt.
Currently, about 40 cents of every dollar spent by the U.S. government is borrowed. Lawmakers are divided over how to get the U.S. government accounts into a healthier state in the longer term.
Even if a deal is reached, there are fears the U.S. could still lose its top credit rating. A downgrade would cost the federal government an extra $100 billion in interest payments a year.
"I expect continued volatility with uncertainty looming above in the clouds ... until a solid resolution has been agreed with both Democrats and Republicans," said Sam Le Cornu, a portfolio manager of Asian equities at Macquarie Funds Group.
"There's just a lot of uncertainty that surrounds equity markets at the moment," he said.
But others were more upbeat on the prospects for stocks.
"There's a lot of bad news that is now discounted and yet they haven't fallen sharply or corrected strongly," said Geoff Lewis, who helps manage $110 billion of equities, bonds and property for J.P. Morgan Asset Management.
"That tells me that the underlying direction in which the equity markets want to go is still upwards."
Asia stock markets drifted aimlessly, as investors seemed uncertain about how to proceed as the U.S. debt impasses drags on.
Japan's Nikkei 225 stock average fell 0.6 percent to 10,039.62 and Australia's S&P/ASX 200 dropped 0.3 percent to 4,560.80.
South Korea's Kospi was nearly unchanged at 2,168.96 after the country's central bank said economic growth slowed in the second quarter as weaker exports, manufacturing and services offset stronger consumer spending and rebounds in capital outlays and construction.
Hong Kong's Hang Seng Index was down less than 0.1 percent at 22,557.23 while China's Shanghai Composite Index rose less than 0.1 percent to 2,704.72. Both indexes flip-flopped between positive and negative territory in morning trading.
Benchmarks in Singapore, New Zealand and India also retreated while Taiwan's rose.
The U.S. debt crisis pushed the dollar lower against Asian currencies, which is helping prop up Asian markets because when the dollar weakens, it's better for investors to hold Asian rather than U.S. stocks, Le Cornu said.
In currencies, the dollar weakened slightly to 77.82 yen from 77.88 late Tuesday in New York. The euro was unchanged at $1.4518. On Tuesday, the euro rose above $1.45 for the first time since July 5, while the dollar fell below 78 yen for the first time since mid-March. The Australian and New Zealand dollars and Thai baht have also strengthened against the dollar.
Oil prices dropped to near $99 a barrel after a report showed U.S. crude supplies unexpectedly jumped last week, suggesting demand may be weakening.
Benchmark oil for September delivery was down 49 cents to $99.10 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude rose 39 cents to settle at $99.59 on Tuesday.
Associated Press Writer Alex Kennedy in Singapore contributed.