ETX Capital Daily Market Bite, 16th October 2013: Markets Soft; All Eyes On US Lawmakers For A Deal
October 16, 2013 8:03 am
October 16th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist.
Soft start for European share markets as investors remain fixated with noises out of Washington over a deal to avert a potential US default on Thursday. Across other asset classes; gold is up 12 bucks, living up to its safe-haven label, core government bonds are largely flat while the US dollar gets a bit of a slapping on nervousness about the US fiscal situation.
Lawmakers in the US have today to whack out a deal to lift the country’s borrowing limit — many in the market expect an 11th hour agreement to be announced, much like at the end of 2012, when politicians averted the fiscal cliff. Although market participants are weary of building too much exposure to risk, asset prices are not yet dropping off a cliff — the market remains optimistic enough that lawmakers will not let the US economy meltdown.
A deal so far has been elusive, unable to pass through the House of Representatives where opposition to raising the debt ceiling is most vocal. That being said, over the past 24 hours, lawmakers have made more progress than over the last few weeks, leaving investors feeling comfortable enough that the US will not default on its debt, for now. Fitch Ratings adds the pressure by placing the country’s AAA credit rating on negative watch, citing the Congressional stalemate in Washington as the killer of confidence.
If lawmakers are unable to find common ground and reach a deal today, expect Fitch to take action on downgrading the rating followed by Moody’s and S&P. The silver lining for all market participants is that with the fiscal situation in the US set to remain very much in the backdrop over the next few months, the Federal Reserve will not taper asset purchases, even if we see a deal. US economic growth over the past two weeks during the partial government shutdown has undoubtedly been hurt — consumer and business confidence deteriorates, the labour market momentum is still slow and other facets of the US economy are likely to take a minor hit on the back of this.
So, as we kick off Wednesday’s proceedings in Europe, we have our own macro and corporate releases to contend with. European earnings season has not got off to a great start, similar to that of the US [Citibank, Intel and Coca Cola all disappoint with Q3 reports] with LVMH, Danone, Ubisoft and Publicis, all reporting downbeat earnings this morning. On the macro menu, we have the all important UK unemployment data out soon followed by harmonised euro zone inflation figures as well as euro zone trade balance. Out of the US, look out for earnings from Bank of America, PepsiCo, BlackRock, Amex, eBay and IBM. ________________________________________
October 16th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist.
Soft start for European share markets as investors remain fixated with noises out of Washington over a deal to avert a potential US default on Thursday. Across other asset classes; gold is up 12 bucks, living up to its safe-haven label, core government bonds are largely flat while the US dollar gets a bit of a slapping on nervousness about the US fiscal situation.
Lawmakers in the US have today to whack out a deal to lift the country’s borrowing limit — many in the market expect an 11th hour agreement to be announced, much like at the end of 2012, when politicians averted the fiscal cliff. Although market participants are weary of building too much exposure to risk, asset prices are not yet dropping off a cliff — the market remains optimistic enough that lawmakers will not let the US economy meltdown.
A deal so far has been elusive, unable to pass through the House of Representatives where opposition to raising the debt ceiling is most vocal. That being said, over the past 24 hours, lawmakers have made more progress than over the last few weeks, leaving investors feeling comfortable enough that the US will not default on its debt, for now. Fitch Ratings adds the pressure by placing the country’s AAA credit rating on negative watch, citing the Congressional stalemate in Washington as the killer of confidence.
If lawmakers are unable to find common ground and reach a deal today, expect Fitch to take action on downgrading the rating followed by Moody’s and S&P. The silver lining for all market participants is that with the fiscal situation in the US set to remain very much in the backdrop over the next few months, the Federal Reserve will not taper asset purchases, even if we see a deal. US economic growth over the past two weeks during the partial government shutdown has undoubtedly been hurt — consumer and business confidence deteriorates, the labour market momentum is still slow and other facets of the US economy are likely to take a minor hit on the back of this.
So, as we kick off Wednesday’s proceedings in Europe, we have our own macro and corporate releases to contend with. European earnings season has not got off to a great start, similar to that of the US [Citibank, Intel and Coca Cola all disappoint with Q3 reports] with LVMH, Danone, Ubisoft and Publicis, all reporting downbeat earnings this morning. On the macro menu, we have the all important UK unemployment data out soon followed by harmonised euro zone inflation figures as well as euro zone trade balance. Out of the US, look out for earnings from Bank of America, PepsiCo, BlackRock, Amex, eBay and IBM.
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