Debt ceiling resolution sees DJIA rise by 1.3%..

Oct 17 • Morning Roll Call • 1729 Views • Comments Off on Debt ceiling resolution sees DJIA rise by 1.3%..

new-year-celebrationAnd relax, we can all breathe easy now the debt ceiling impasse has been resolved. From a personal viewpoint many of us in the analyst community are really looking forward to not having to write words such as; “impasse, deadlock, debt ceiling, Congress etc for a long time.” Oh, what’s that, the agreement is only set until the second month of the the New Year?! And then we’ll be forced to go through the whole process again? Sadly that’s the reality and please excuse us for making light of what is a deadly serious situation…

The agreement reached, through a bipartisan agreement between the democrats and republicans, will ‘last’ until February 7th. In effect the Obama administration has bought four months of time, until the desperate charade we’ve witnessed over the past two-three weeks, will be repeated.

It’s a messy situation that neither political side should be taking any credit for. It’s a compromise, not a solution, but here’s the snapshot, still without any definitive figure put on the amount of the actual raise, just the time line.

The compromise will fund the government through to mid-January and raise the debt ceiling through Feb. 7th. It also will set up a budget conference on long-term fiscal issues that would end no later than Dec. 13th. The deal will include an income-verification system for individuals and families receiving subsidies through the Affordable Care Act. And in what was a key priority for the White House, the Treasury Department will still be able to use “extraordinary measures” to work around the debt ceiling in the case that it is not raised by Feb. 7th.

 

UK’s FCA in formal probe into currency fixing claims

The UK’s City regulator, the Financial Conduct Authority (FCA) has stated that it’s launched its own investigations into claims that foreign exchange rates have been rigged. An FCA spokesman issued a short statement – here it is:

“We can confirm that we are conducting investigations alongside a number of other agencies both in the UK and abroad into a number of firms relating to trading on the foreign exchange (forex) market.

“As part of this we are gathering information from a wide range of sources including market participants. Our investigations are at an early stage and it will be some time before we conclude whether there has been any misconduct which will lead to enforcement action. We will not comment further on our investigations.”

This relates to reports that currency traders may have managed to influence the daily ‘fixes’ for foreign exchange rates.

 

Record numbers of UK part-time workers who’d rather be full-time

There was some positive news on Wednesday from the UK in terms of the unemployment numbers falling by 18,000 during the last quarter. What’s more the UK now has record amounts of its citizens in work, close on 30 million adults. However, pulling back the ONS Wizard Of Oz curtain and analysing the data in more detail, reveals that the news wasn’t all good.

For June to August 2013, there were 1.45 million employees and self-employed people who were working part-time because they could not find a full-time job, the highest figure since records began in 1992. For June to August 2013, almost a third of male employees and self-employed people who were working part-time were doing so because they could not find a full-time job. The corresponding figure for women was 13.5%.”

What the figures reveal is that the UK has gone through a real ‘sea change’ in terms of its employment parameters and that paradigm shift has taken place in a blink of an eye. There’s been a real shift from full time secure employment to part time insecure employment. The irony that the UK Chancellor was in China praising their work ethic won’t be lost on many readers, they could be forgiven for thinking that the Chinese work model is something the UK Chancellor aspires to. Nearly 27% (8 million) of the UK working population citizens are now in part time employment.

 

Euro area international trade in goods surplus 7.1 bn euro, Euro area annual inflation down to 1.1%

The first estimate for the euro area1 (EA17) trade in goods balance with the rest of the world in August 2013 gave a 7.1 billion euro surplus, compared with +4.6 bn in August 2012. The July 20132 balance was +18.0 bn, compared with +13.8 bn in July 2012. In August 2013 compared with July 2013, seasonally adjusted exports rose by 1.0% and imports by 0.2%. Euro area annual inflation was 1.1% in September 2013, down from 1.3% in August. A year earlier the rate was 2.6%.

Monthly inflation was 0.5% in September 2013. European Union annual inflation was 1.3% in September 2013, down from 1.5% in August. A year earlier the rate was 2.7%. Monthly inflation was 0.4% in September 2013.

 

Market overview for Wednesday October 16th

The DJIA index closed up 1.36%, the SPX up 1.38% and NASDAQ up 1.20%. The debt ceiling compromise came too late to impact on European markets, STOXX index closed up 0.36%, FTSE up 0.34%, CAC closed down 0.29% and the DAX up 0.47%. The MIB closed up the most by 1.45% on the day.

Commodities enjoyed a positive day, ICE WTI oil up 0.89% on the day at $102.11 per barrel, NYMEX natural down 0.21% at $3.78 per therm. COMEX gold finished the day up 0.68% at $1281.80 per ounce, silver on COMEX up 1.03% at $21.41 per ounce.

Equity index futures are suggesting that the DJIA will open up 1.02%, the SPX up 1.25% and the NASDAQ up 0.72%. European equity index futures are also suggesting levels of positive sentiment, FTSE up 0.25% DAX equity index future up 0.36%.

 

Forex focus

The yen fell 0.6 percent to 98.77 per dollar and reached 98.97, the weakest since Sept. 27th. The Japanese currency dropped 0.7 percent to 133.67 per euro. The dollar was little changed against the euro at $1.3534 after weakening earlier as much as 0.3 percent and appreciating 0.4 percent. It touched $1.3473, the strongest since Sept. 30th.

New Zealand’s dollar, the kiwi, climbed after the statistics bureau said consumer prices increased 0.9 percent in the third quarter, the fastest pace since the period ended June 2011. An industry report released this week showed home prices climbed to a record in September.

The loonie, as the Canadian dollar is known, gained 0.5 percent to C$1.0328 per U.S. dollar late in Toronto, the strongest since Oct. 8th. One loonie buys 96.82 U.S. cents.

 

Bonds

Rates on $120 billion of bills maturing Thursday, the same day that Treasury Secretary Jacob J. Lew has said the U.S. will run out of measures being used to keep the government solvent, dropped by 28 basis points, or 0.28 percentage point, to 0.035 percent, after rising as high as 0.36 percent yesterday.

 

Fundamental policy decisions and high impact news events that could affect market sentiment on October 17th

Retail sales in the UK could affect the value of Sterling, last month’s data was poor, the print came in at -0.9% MoM, the anticipation for this month is a return to growth of 0.5%.

Unemployment claims in the USA may have ‘settled’ after the various ‘off grid’ issues from California and Nevada over recent weeks, the anticipation is for a print of 357K.

The Philly Fed manufacturing index is predicted to come in at 15.4 from 22.2 the previous month, the reason for the fall will probably be attributed to the debt ceiling impasse.

Later on in the evening data from China could affect sentiment; GDP predicted to come in at 7.8% and industrial production at 10.1% year on year.

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