Concern is growing over the United States budget shutdown extending further into October as it becomes more likely the standoff will merge with a fight over raising the US debt limit.
Craigs Investment Partners broker Chris Timms said the partial shutdown of the US Government showed no signs of ending quickly, as lawmakers hardened their positions and sought to shift blame to the other side.
The fight over raising the debt limit later this month would mean the issue moving from just budget funding to whether the Government could pay all its bills.
The result could be a dangerous and unpredictable fiscal super-storm that might be harder to resolve than the shutdown alone or the 2011 debt limit struggle that sent financial markets plummeting and brought the US to the brink of default, he said.
House Republicans were seeking a way out of the impasse yesterday, flinging five proposals for partial funding at the Democrats and seeking to engage the Senate and President Barack Obama in direct talks. Mr Obama warned Wall Street should be concerned a conservative faction of Republicans was willing to allow the country to default on its debt.
He would not hold budget talks with Republicans until they allowed the US Government to reopen and pass a Bill to raise the US borrowing limit. The US Government closed non-essential operations on Tuesday, after Congress failed to reach a new budget deal.
''I think it's important for them to recognise this is going to have a profound impact on our economy and their bottom lines,'' Mr Obama said in an interview on CNBC, following a meeting with US financial sector leaders.
Mr Obama said Republican House Speaker John Boehner was unable to say no to ''a small faction'' of the Republican Party, and if a few people ''are allowed to extort concessions'' then any president who followed him would find himself unable to govern effectively.
Mr Timms said the situation in Washington was fluid and it was difficult to predict with any precision what decisions the parties would take and how the fiscal debates would unfold.
''Clearly, the chances of an extreme outcome have risen with the most probable scenario a small deal that allows some political cover for all.''
Should the situation worsen, a larger fiscal package including changes to the sequester (automatic budget cuts), reform of the tax code and modifications to the entitlement programmes could provide greater cover for both sides, he said.
''Ironically, the worse things get, the greater the changes of a bigger fiscal deal.''
The passage of tax reform and less blunt austerity measures was still a long shot, but the government shutdown and debt ceiling debate was contributing to a ''very dynamic environment'' in which entrenched interests might have less influence than usual, Mr Timms said.
Craigs expected a brief government shutdown would not derail US growth.
