Market Update 02/10/13

One line- Investors look ahead to debt ceiling talks with risk off moves continuing in Europe and the US.

- Asian stocks outside Japan rose overnight as the rally from yesterday continued. The Nikkei slid 2.17% as the yen continued to strengthen and as Abe revealed a 5 trillion yen ($51 billion) stimulus package to cushion the blow from the sales tax increase in April. http://www.bloomberg.com/news/2013-10-02/asian-stocks-advance-as-investors-weigh-u-s-shutdown-correct-.html

- European stocks fell this morning along with commodities as investors weigh the effects of the US government shutdown. Brent crude lost 0.3% while the FTSE is down 0.87% this morning. Investors are now looking ahead to the debt ceiling talks and considering the potential length of the shutdown. Emerging currencies slid as the market moves away from riskier assets. http://www.bloomberg.com/news/2013-10-01/australian-futures-rise-after-u-s-gains-as-crude-sinks.html

- Gold held steady on Wednesday after selling off steeply but its status as a safe haven asset has been damaged this year. It is near a two month low at $1287. Bullion has declined 23% in 2013 on course for its first annual decline since 2000. The prospect of QE coming to an end meant investors were less concerned about protecting against potential inflation and so demand for the bullion dropped significantly.  http://www.ft.com/cms/s/0/ac25e156-2aaf-11e3-ade3-00144feab7de.html?siteedition=uk#axzz2gYO7NOJO

- The longer the shutdown lasts the more we are likely to see dollar weakness as investors expect tapering to be delayed further and further. The dollar index yesterday fell 0.4% on the first day of the shutdown and further weakness is likely. http://www.bloomberg.com/news/2013-10-02/dollar-seen-as-shutdown-loser-as-growth-hit-spurs-qe-currencies.html

- The US has begun implementing "final extraordinary measures" to pay the nations bills ahead of an October 17th deadline for Congress to approve new government borrowing according to Jack Lew, Treasury Secretary. Without a raising of the debt ceiling later this month the US government would enter technical default, a situation that would shake global financial markets violently. http://www.ft.com/cms/s/0/8dbd08ac-2a91-11e3-ade3-00144feab7de.html#axzz2gYO7NOJO

Data

S&P 1695.00 0.80%
FTSE 6411.86  0.75%
Nikkei 14,170.49 2.17%

EUR/USD- 1.3536 0.07%
USD/JPY- 97.53 0.48%
GBP/USD- 1.6220 0.15%

Gold- 1295.70 0.63%
Oil (Brent)- 107.76 0.17%

Copper- 327.75 0.11%

10 year yields

US- 2.64 (-1bps)
UK- 2.70 (-1bps)
Japan- 0.63 (-3bps)