Market Update 23/09/13

One line- Slow day trading as the market begins to shift focus from tapering to the US debt ceiling.

- Asian stocks traded near a four month high overnight after a Chinese manufacturing index surprised on the upside. HSBC and Markit Economics preliminary PMI figure was 51.2 - a sixth month high. Emerging stocks gained on the news with the MSCI emerging markets index adding 0.1%. Japanese markets were closed for holiday. http://www.bloomberg.com/news/2013-09-23/asian-stocks-near-4-month-high-before-china-manufacturing.html

- European stocks were little changed this morning as Merkel won 41.5% of the vote in the German elections over the weekend. Her previous coalition partners, the Free Democrats, did not win a large enough share to form a coalition with. It is expected she will have to pursue a grand coalition with the SDP, merging centre right with centre left. http://www.ft.com/cms/s/0/ab5476ac-2406-11e3-b506-00144feab7de.html#axzz2fhhD6zDQ  http://www.bloomberg.com/news/2013-09-23/european-stock-futures-little-changed-after-merkel-win.html

- The euro approached a seven month high after Merkel's win while the dollar continued to sell off on the back of the unchanged QE announcement by the Fed. The euro has strengthened 2.6% this year against the dollar and 17% against the yen. http://www.bloomberg.com/news/2013-09-22/euro-gains-against-dollar-after-merkel-seen-winning-election.html

- Market focus will begin to shift to the possibility of a US government shut down following relief from the delay of tapering. Republicans are using the issue to try and force a de-funding of Obama's healthcare bill. Government shut down would occur early in October while the debt ceiling needs to be raised to prevent default by late October.  http://www.bloomberg.com/news/2013-09-23/stocks-at-risk-with-government-shutdown-looming-before-a-default.html

Data

S&P 1709.91 0.72%
FTSE 6588.77  0.12%
Nikkei closed

EUR/USD- 1.3520 0.03%
USD/JPY- 98.96 0.40%
GBP/USD- 1.6044 0.24%

Gold- 1327.50 0.12%
Oil (Brent)- 109.13 0.08%

Copper- 329.50 0.77%

10 year yields
US- 2.74 (0bps)
UK- 2.93 (+1bps)
Japan- 0.69 (0bps)