Market Update 15/10/13

One line- Positive progress on a debt ceiling and government shutdown deal drives equities higher, while bonds sell off.

- A sentiment change regarding the US debt ceiling talks has reversed market caution yesterday as the S&P added 0.41%, the Nikkei added 0.26% and the FTSE has begun the day up 0.68%. Industrial commodities are unchanged, gold has sold off 1.3% and the dollar is showing strength this morning. Treasuries sold off adding 4bp to the ten year yield as did gilts and bunds. http://www.ft.com/cms/s/0/03057c8a-3540-11e3-8148-00144feab7de.html?siteedition=uk#axzz2hmPR6Cqx

- The US debt ceiling deal which is being brokered in the Senate would end the government shutdown and raise the nations borrowing limit in favour of three further deadlines in the next 4 months. The potential obstacles to the bill being passed are that a single senator such as Ted Cruz could stall the bill as when he spoke for 21 hours during a budget debate last month or that the Republican majority House of Representatives could send the bill back for amendment. http://www.bloomberg.com/news/2013-10-15/senate-debt-limit-deal-emerging-with-time-running-short.html

- Emerging stocks have risen to 4 month highs on optimism about a potential debt ceiling deal while the yuan rose to its strongest level in 20 years as China reported record currency reserves. The MSCI Emerging Markets index has lost 2.2% this year as slowing growth and the prospect of the end of Fed QE changed investor sentiment. http://www.bloomberg.com/news/2013-10-15/emerging-stocks-rise-to-four-month-high-on-u-s-deal.html

- Angela Merkel is holding key talks with potential coalition partners this week with most analysts expecting her to create a "grand coalition" between her centre-right Christian Democrats and the centre-left Social Democratic party. She has talks scheduled today for meetings with the Green party although if they were to form a coalition it would surprise analysts as there are core issues that the parties disagree on.  http://www.ft.com/cms/s/0/f10b0f60-34ed-11e3-8148-00144feab7de.html#axzz2hmPR6Cqx

- China has granted UK based financial institutions an £8.2 billion quota to invest in Chinese securities. The two countries also agreed to allow direct renminbi-sterling trading in Shanghai and offshore making the pound the fourth currency to trade against the Chinese currency. http://www.ft.com/cms/s/0/9579f608-356e-11e3-b539-00144feab7de.html#axzz2hmPR6Cqx

Data

S&P 1710.14 0.41%

FTSE 6563.42  0.86%
Nikkei 14,441.54 0.26%
EUR/USD- 1.3506 0.41%
USD/JPY- 98.65 0.08%
GBP/USD- 1.5937 0.29%

Gold- 1256.19 1.28%
Oil (Brent)- 110.37 0.60%

Copper- 329.15 0.35%

 

 

10 year yields

US- 2.73 (+4bps)
UK- 2.80 (+6bps)
Japan- 0.66 (+1bps)