The irrational gains in the equity market which we’ve seen towards the end of the last week on the back of the optimism that there could be a resolution over the US debt ceiling has evaporated this morning. Thanks to the violent reaction shown by the angry traders this morning who are pushing the sell button, as we head towards the third week of the US government shutdown with no resolution insight.
One would think that there could have been a possible resolution between the Democrats and the Republican, but obviously given the circumstances, it seems a very naïve and optimistic hope and the result of this is punishing the US futures and European markets. Unquestionably, the politicians in Washington need to stop playing this rotten game with the markets and stop testing the exhaustion level of traders.
The budget talks which are heading towards the final chapter of this long drawn out saga could even fail in this phase as well, as there are still tensions between the Democrats and the Republicans over the sequester cuts.
On the more macroeconomic front , the Chinese economic data for September has given some support to the Asian markets. The data has shown that the economic activity in the country has picked up and exceeded the expectations. It also exhibited that the imports have become much healthier and has surpassed above 7.4%.
However, the exports for the country has shown a sharp decline from 7.2% in August by 0.3% and the inflation has also increased quite sharply to 3.1% which is well above the expectations of 2.8%. This leaves a little room for the government to maneuver its monetary policy to stimulate the growth in the country.