Your morning market update, where this shutdown thing has probably gone on long enough.
– Time is running out for US policy makers to get things sorted, so news overnight that negotiations between Senate leaders Reid and McConnell had broken down sent stocks into a bit of a tailspin. Increasingly it looks just like the passage of the first TARP bill in late 2008 after the collapse of Lehman Brothers. At that time, no one in the market thought it possible the rescue bill could get defeated, yet it did and the market collapse began in earnest. So at 15 days, this government shutdown has dragged on longer than many thought possible and is now pressing right up against this week’s deadline for the debt ceiling.
– As a consequence what had been a down, but not terrible, day turned into a bit of a rout in the US. The Dow dropped 133 points or 0.87%, the Nasdaq fell 0.56% and the S&P lost 12 points and is back below 1700 at 1698 for a loss of 0.71%. Key for me is that President Obama is not going to blink on this in the way that the Republicans thought he might (personally I think what happened in Syria, forced backdown by the Russians, has always guaranteed this) with White House spokesman Jay Carney taking the ball up and calling this a “manufactured crisis”.
– So we can pretty much ignore the positivity in European markets which saw the FTSE up 0.64% and DAX up 0.92% to a new all-time high of 8804. The CAC is up 0.78% and stocks in Milan and Madrid are up 0.43% and 1.12% respectively.
– Indeed, on the Sydney Futures Exchange the SPI 200 fell 16 points overnight to 5231 bid. On the interest rate markets, the 3-year contract is up 1 point and the 10-year contract down 1. Volume looks pretty high at the moment in overnight trade compared to last week which is very interesting.
– On Forex markets, the big news was the rally in the Aussie Dollar which took out resistance at 0.9520, running up to 0.9547 before dropping back to 0.9511 this morning. It’s a failed break so far against the US Dollar but the Aussie has outperformed the Euro (1.3516 even though the ZEW sentiment survey in Germany rose to 52.8 from 49.6) and GBP (1.5991), which suggests enduring strength overall. USDJPY was a little lower at 98.34.
– Gold had a wild night on Commodity markets, plunging to $1255 at one stage before recovering to $1281 this morning. Crude oil lost $1.28% and is at risk of breaking sharply lower through $100. Nymex crude is at $101.10 this morning. Copper is at $3.30 and the Ags dance continued with Corn down 1.37%, Wheat falling 0.94% and soybeans losing 0.54%.
On the data front today we see Chinese FDI, Westpac Leading Indicators and then EU CPI and trade as the only other major outturns. It’s all about the US and the political impasse at the moment and we know the market is threatened by a failure to meet the deadline this week, but if they do get a deal done – gee whiz, stocks feel like they are going to roar.