Market Update 16/10/13

One line- Markets cautious on the lack of a deal emerging from Congress.

- The lack of a resolution from Congress is having a mixed effect on the markets. The dollar index is marginally stronger, although vs the euro and the pound it has softened. The S&P sold off 0.71% while the Nikkei added 0.18% on a weaker yen. European markets have opened down this morning with the FTSE off 0.39%. Commodities show a relative calm with gold and brent trading up slightly and copper is flat. Ten year yields in US and the UK are virtually unchanged following the sell off yesterday.  http://www.ft.com/cms/s/0/e64cd252-360a-11e3-b539-00144feab7de.html?siteedition=uk#axzz2hgOooFmp

- As Senate leaders look to put together a deal that will pass both houses two key Republicans have the power to push the US into a technical default. Senator Ted Cruz is yet to rule out stalling the bill by engaging the Senate in a debate which can last up to 30 hours. John Boehner Speaker of the House of Representatives has the option to amend the bill when it comes down from the Senate. Democrats believe they have enough votes to allow a bill to pass the House of Representatives.  http://www.bloomberg.com/news/2013-10-16/senate-leaders-resume-fiscal-talks-as-house-scraps-vote.html

- Merkel's talks with the Green Party in an effort to pursue other coalition options broke down yesterday as the two parties decided they didn't have enough in common.This leaves Merkel set to form a "grand coalition" with the centre left Social Democrats. http://uk.reuters.com/article/2013/10/16/uk-germany-coalition-greens-idUKBRE99E17X20131016

- Portugal is looking to cut spending by 3.2 billion euros next year in a effort to meet targets set by the IMF and the EU. Portugal's ten year yield is at 6.22%, unemployment is 16.5% and their budget deficit is 4.4%.  http://www.bloomberg.com/news/2013-10-15/portugal-plans-3-2-billion-euros-of-spending-cuts-for-next-year.html

- The Brazilian real has rallied 11% since its August 5 year lows buoyed by Bernanke's decision not to taper and continued interest rate increases from the central bank with the benchmark rate now at 9.5%. http://www.ft.com/cms/s/0/8fbf3f90-3571-11e3-b539-00144feab7de.html#axzz2hgOooFmp

- The UK unemployment rate held steady but the sharpest fall in the claimant figure for 16 years showed the labour market is healing. Unemployment held steady at 7.7% while the number claiming benefits dropped   41 700. http://uk.reuters.com/article/2013/10/16/uk-britain-jobs-idUKBRE99F07E20131016

Data

S&P 1698.14 0.71%

FTSE 6518.66  0.46%
Nikkei 14,467.14 0.18%

EUR/USD- 1.3533 0.07%
USD/JPY- 98.40 0.24%
GBP/USD- 1.6028 0.19%

Gold- 1277.20 0.40%
Oil (Brent)- 109.86 0.09%

Copper- 327.70 0.92%

 

 

10 year yields

US- 2.72 (0bps)
UK- 2.82 (+2bps)
Japan- 0.64 (-2bps)