Senate deal brings market reprieve

17 October 2013

Senate deal brings market reprieve

By Tracey Warren (Stockbroking Sales Executive, CMC Markets Stockbroking)

Confidence soared on Wall Street overnight as Senate leaders gave markets a little reprieve announcing an agreement to finally end a government standoff that began on 1-October. This will buy some time reopening the government till 15-January and extending the debt ceiling till 7-February. With the crisis averted for now and markets finding their swagger again, the S&P 500 closed only four points below its all-time high in September at 1,721.54. The Dow Jones industrial average likewise followed suit ending up 1.36% at 15,373.83.

With markets soothed and investors finally able to take a much needed breath, there is still the small issue that the US government has been shut down for a full 16 days. Knock-on effects will likely be triggered with confidence and fourth Quarter GDP likely to take a hit. As Wall Street dusted itself off overnight and jumped back into the ring, the CBOE volatility index or “fear index” saw its biggest one-day decline since August, back to 14.71. US Treasury one month T-bills saw a jump in demand with US$20bn auctioned without a hitch.

The US dollar rose against the majority of currencies overnight as the euphoria of an agreement took hold with oil also a benefactor tracking the stock market higher. Gold and Bond markets were cooled as default fear abated. Metals were little changed and iron ore rose 10c to US$133.70 a tonne.

The US Fed beige book was released overnight sighting modest growth, mentioning the potential impact of the government shutdown. The NAHB housing market sentiment was also released showing a four month low of 55, down from 57 in September. Tonight, it is unlikely we will see the scheduled industrial production and housing start numbers released but will likely see a reopened government.

Today locally NAB quarterly business confidence figures will be released at 11:30am.

ends

© Scoop Media