With no clear path out of the impasse, agencies warned that the government shutdown would halt the release of a closely watched September employment report and lead to the furlough of 750,000 federal workers at a daily cost of US$400 million.

Both S&P 500 futures and Nasdaq futures dropped 0.5 percent. Gold prices climbed to $3,875 an ounce, hitting a record high for third straight session. European futures were little changed.

With Friday’s non-farm payrolls report absent, investors may place greater weight on the ADP National Employment Report due later today. Forecasts are centered on a modest gain of 50,000 private-sector jobs.

"Typically, a shutdown is immaterial for markets. In fact, the 2018-2019 shutdown, which lasted for over a month, actually saw Wall Street rise," said Kyle Rodda, a senior analyst at Capital.com.

Rodda added the issues for markets are twofold, with one being the delay of release of the non-farm payrolls data. The other one is "US President Trump has also threatened to permanently lay-off workers, which could turn the shutdown into a mini-labor market shock," he said.

Futures now imply a 96 percent chance of a rate cut from the Federal Reserve in October, up from 90 percent from a day earlier, with around a 74 percent probability of another move in December.

Anthony Saglimbene, chief market strategist at Ameriprise, said in a note that if the shutdown lingers, September inflation reports in mid-October could also be negatively affected.

"An extended period where the US Bureau of Labor Statistics is not operating at full strength could affect data collection efforts for other reports, which may impact the quality of the data," he said.

On Wednesday, Japan's Nikkei dropped over 1 percent, after an 11 percent surge the previous quarter. South Korean shares rose 0.6 percent, adding to the 11.5 percent gain in the last quarter, after data showed its exports rose at the fastest pace in 14 months in September.

Taiwan's shares gained 1.3 percent. The island's top tariff negotiator said on Wednesday that Taiwan will not agree to a deal with Washington for half of all semiconductor production to take place in the US

Chinese markets, including Hong Kong, are closed for a public holiday.

Overnight, Wall Street managed to end the quarter on a positive note, closing higher. Data showed US job openings increased marginally in August and hiring declined, and consumer confidence fell by more than expected.

In foreign exchange markets, the dollar index held steady after three straight days of losses and was last at 97.84. It was flat at 147.98 yen, reacting little to a Bank of Japan survey showing Japanese companies expect consumer prices to rise an average 2.4 percent a year from now, above the central bank's 2 percent target.

In the Treasuries market, yields were steady in Asia. The benchmark US 10-year Treasury yield was flat at 4.1561 percent, having risen 1 basis point overnight.

Oil prices steadied on Wednesday after two consecutive days of losses as investors weighed potential OPEC+ plans for a larger output hike next month against the prospect of shrinking inventories in the US

US crude inched up 0.1 percent to $62.46 a barrel, while Brent was 0.2 percent higher at $66.16.