Shutdown is a name calling game
By looking at the gains which were made in the European and the US markets yesterday, it would seem that investors have made peace with the idea that the US government shutdown is a name-calling game. But, the devil is always in the details, and if this shutdown prolongs over a week you could certainly have a disastrous consequences for the global economy.
Traders are hoping that the politicians would possibly do the right thing at the end of the day, and the tone which is causing a friction between the two parties and increasing the baseline distance, would end its divide.
Debt ceiling and government shutdown could thwart matter
One has to ask if such a thing is easily possible, given the stalwart behaviour of the both parties. Since we do not have any structure in place for this government shutdown, and the debt ceiling approaching on the 17th of October, this would thwart things further. If such a scenario does take place, it would certainly make the market nerves to jangle again.
ADP data in the absence of NFP
Provided that we know, we are not going to get the non-farm payroll on the coming Friday, the September ADP employment report which is due at 12:15 GMT, would certainly have a lot of important amid investors. The expectations for the final reading is 176K which will be on change from August’s reading.
And lets not forget if we do not get our market loved non-farm payroll data on Friday, we would have to consider that there could be a strong possibility that we do not see any tapering by the end of this year.
Mr Letta’s Vote of confidence under question
Back in Europe, the political situation is becoming more bizarre given what is going on in Italy. The Italian prime minister Enrico Letta is expected to go ahead with the confidence vote, and the concerns are that he may not be able to conquer this, given his own party is tired of his antics. But, hopes remain for Mr Letta, after Angelino Alfano, who is the secretary of Berlusconi’s party, confirmed that the party should be supporting Mr Letta. And if other members of the party articulate this view, there is no doubt that Mr Berlusconi will feel the cold before the winter arrives.
Draghi Could face serious hysteria; LTRO and Euro strength will challenge
Under this dirty game of politics, and there will be more pressure on the European Central bank’s president when he will be making his speech this afternoon. Given the strength of the euro, and over 40% of unemployment rate among youngsters in Italy, and the total unemployment stands at its highest peak in Italy, Mr Draghi will face serious hysteria. The expectations are that Mr Draghi will leave the interest rates unchanged and perhaps he will try to do covertly talk to lower the strength of the currency which is causing a damage for weaker European economies.
The fractured nature of the European banks, weak and a fragile recovery in the Eurozone, feeble business lending could certainly stimulate the talks of the LTRO.
Construction PMI data could help FTSE
In the FTSE hundred’s trading relatively sanguine this morning despite the fact that the sterling economy reported its manufacturing PMI for September below expectations, but the employment component has definitely boded investors confidence. The construction PMI data for September and will be the main focus for traders and the expectations are 60.1 while the previous reading was 59.1. We are expecting a positive figure due to strength in the employment rate.
The CAD, GBP, DKK are trending up against the dollar while the EUR, JPY and NZD are trending down against the dollar on an intra day basis.