Markets Overnight: Budget Deadline Takes Center Stage

by Enis September 27, 2013 4:33 am • Commentary

Global markets were most focused on U.S. Congress because the budget debate continues ahead of the Sept. 30th deadline (not to be confused with the debt ceiling debate that has a mid-to-late October deadline).

  1. U.S. Senate Likely to Send Bill Back to House Today or Tomorrow – If Speaker Boehner cannot find a way to pass a spending bill that the Senate would approve by Monday, then a government shutdown starting on Tuesday becomes the most likely scenario.  Expect heated political wrangling over the weekend.  Markets clearly expect a last-minute resolution, though as the WSJ points out, credit default swap insurance prices on the U.S. have risen in the past week.
  2. Asian Equity Indices Mostly Higher, Though All Within 0.5% – No major market moved more than 0.5% in either direction, a clear sign of the wait-and-see attitude of global investors.  The main economic news was Japan’s CPI numbers, which were right about in line with expectations.  The yen strengthened slightly after the report.
  3. For Second Day, European Stocks Open Green, Quickly Move Red – In almost identical action to yesterday’s open, European stocks quickly went from green to red after the open.  SPX Futures moved down 4 points to 1688.50 as that occurred.  The 1685 level in SPX futures is obvious short-term support.
  4. Commodities and Bonds Close to Flat, High Beta Currencies Fall – The major asset classes were also quiet overnight.  In FX, the big winners after the FOMC release last week have been relentlessly sold ever since.  The Turkish lira, Mexican peso, and Aussie dollar are all near 10 day lows after falling for the past 4 days.
  5. Personal Income and Spending Data at 8:30 am, UMich Conf at 9:55 am – Those releases are relatively minor, but set the stage for next week’s packed economic calendar, including the Manufacturing ISM, ADP Employment, Non-Manfacturing ISM, and Payrolls.