Market Update 17/10/13

One line- Relief from deal in Congress is short lived as investors contemplate the effect of the government shutdown.

- Congress finally passed a bill to end the government shutdown and to extend the debt ceiling until early next year. Senate approved the agreement 81 to 18 while the House of Representatives passed the bill 285 to 144. Government is reopened until January 15th while the debt ceiling is extended until February 7th. Budget deficit negotiations must be completed by December 13th. The deal is a huge blow for the Republicans who had virtually none of their demands met. http://www.ft.com/cms/s/0/d9c98224-364f-11e3-aaf1-00144feab7de.html?siteedition=uk#axzz2hgOooFmp

- Global stocks sit at a 5 year high following the successful deal in Congress. The S&P added 1.4%, the Nikkei added 0.8% but the relief was short lived in Europe where companies are lowering their financial targets. The Stoxx 50 is down 0.8% this morning. The dollar has fallen sharply this morning while gold has spiked after a Chinese rating agency lowered the credit rating of the US and as traders expect the budget impasse makes near term tapering unlikely. Ten year Treasuries yields eased 5 basis points while copper and WTI slid. http://www.ft.com/cms/s/0/f28bb18a-36cf-11e3-aaf1-00144feab7de.html#axzz2hgOooFmp  http://www.bloomberg.com/news/2013-10-17/european-stock-index-futures-little-changed-amid-earnings.html

- Greece is facing tough negotiations from international lenders as the troika spotted a potential 2 billion euro shortfall in the budget draft Greece submitted. Greek finance ministers claim the gap amounts to only 500 million euros and can be bridge by cracking down on social security fraud by small businesses. The troika want the government to commit to further austerity measures to breach the gap.  http://www.ft.com/cms/s/0/06f26484-3707-11e3-9603-00144feab7de.html#axzz2hgOooFmp

- UK September retail sales rose more than forecast adding to the positive jobless claims news yesterday. Retail sales increased 0.6% from August higher than the 0.4% forecast. With continued low rates from the Bank of England and general improvements in macro indicators the UK recovery seems to be gathering momentum. The pound pushed higher against the dollar this morning on the news.  http://www.bloomberg.com/news/2013-10-17/u-k-september-retail-sales-increase-more-than-forecast-1-.html

Data

S&P 1721.54 1.38%

FTSE 6546.55  0.38%
Nikkei 14,586.51 0.83%

EUR/USD- 1.3623 0.66%
USD/JPY- 98.02 0.76%
GBP/USD- 1.6082 0.82%

Gold- 1307.28 1.93%
Oil (Brent)- 110.86 0.82%

Copper- 328.80 0.60%

 

 

10 year yields

US- 2.62 (-4bps)
UK- 2.79 (-4bps)
Japan- 0.63 (-1bps)