The U.S.A has begun to use its final extraordinary measures in order to avoid breaching the nation’s debt limit, Treasury Secretary Jacob J. Lew said as he urged Congress to increase borrowing authority. By his calculations the USA will run out of funds by October 17th. Spending by the USA govt. can reach $60bn on some days. Ten-year U.S. yields were little changed at 2.64 percent early in the London session. The price of the 2.5 percent note due in August 2023 was 98 25/32.
The dollar rose versus the majority of its major currency peers as the ADP jobs report is predicted to show that the USA added circa 177K jobs in September. The euro retreated from an eight-month high versus the dollar before the European Central Bank meets today for the first time since President Mario Draghi said he’s ready to inject cash into the banking system under the LTRO (long term refinancing measures). Attention at lunchtime GMT will turn to the ECB’s rate setting announcement and the subsequent conference to be held by the ECB.
Mario Draghi stated in response to questions from the European Parliament on September 23rd;
[quote]”We are ready to use any instrument, including another LTRO if needed, to maintain the short-term money markets at the level that is warranted by our assessment of inflation in the medium term.”[/quote]
Japan attempts to reflate and stimulate their economy
Japanese Prime Minister Shinzo Abe’s reflation efforts have now focused on structural domestic reforms as he unveiled a stimulus package offering a short-term cushion for the first sales-tax rise since 1997. There will be one trillion yen in annual tax cuts, whilst policy makers will decide in December on an early end to a levy on companies for earthquake reconstruction. Without the support measures, the economy would face an extremely high risk of stalling. Households are bracing themselves for a 3 percentage point increase in the consumption levy, to 8 percent, starting April 1st 2013. Consumer confidence fell in August for a third consecutive month, as sentiment among business declined for a fifth successive month.
Market snapshot at 10:00 am UK time
During yesterday’s trading sessions investors failed to be concerned with regards to the partial shutdown of the USA government, however, the sentiment across the board in European equity markets has changed dramatically in the morning session, with all major indices in the red at the time of writing.
The Nikkei index fell sharply in the overnight session, falling by 2.17%. The Hang Seng was up 0.55% and the CSI up 0.59%. The ASX 200 failed to react negatively to some poor data published on housing permits and closed up 0.17%.
European equities are mainly in the red with few exceptions; STOXX index down 0.60%, FTSE down 0.85%, CAC down 0.86%, DAX down 0.55%, whilst the Italian bourse, the MIB, has reacted well to the news that the Italian govt. will probably remain intact by rising 0.88%. The Athens exchange is down 1.14% at the time of writing.
Commodities have fallen in the early part of the London and European session, ICE WTI oil down 0.48% at $101.55 per barrel, NYMEX natural is down 0.11% at $3.60 per therm. COMEX gold is up 0.47% at $1292.10 per ounce with silver down 0.29% on COMEX at $21.12 per ounce.
Looking towards the New York bell the DJIA equity index future is down 0.65%, only 22 points from the critical 15,000 level. The SPX equity index future is down 0.80% and the NASDAQ down 0.65%.
Forex focus
The 17-nation shared currency was little changed at $1.3518 early in the London session after reaching $1.3588 yesterday, the highest level seen since Feb 6th. It weakened by 0.5 percent to 131.90 yen. The dollar fell by 0.4 percent to 97.57 yen. The euro retreated from its eight-month high versus the dollar before the European Central Bank meets today for the first time since President Mario Draghi said he’s ready to inject cash into the banking system if necessary.
New Zealand’s dollar weakened for a second day after a central bank official said the nation’s neutral interest rate has fallen. The kiwi dollar slid 0.8 percent to 82.14 U.S. cents after reaching 81.94, the lowest level seen since Sept 17th. It declined 0.3 percent yesterday.
The Australian dollar declined by 0.4 percent to 93.58 U.S. cents in Sydney after touching 94.35 yesterday, the most since Sept 23rd. The Aussie slid versus most of its 16 major counterparts, reversing the gains from yesterday after the Reserve Bank of Australia kept borrowing costs unchanged. Australia’s dollar retreated from a one-week high versus its U.S. peer after reports today revealed that the nation had a bigger-than-expected trade deficit in August and building approvals climbed less than economists forecast.
