US Govt deal in the offing – ‘financial meltdown’ averted

US Government deal in the offing – ‘financial meltdown’ averted

By Niall King (Sales Trader, CMC Markets)
17 October 2013

With the debt hullabaloo in the US pushed back onto the to-do list for early next year, the local sharemarket has moved 0.5% higher in the early trading this morning. Financial and Industrial sectors have led the way so far today, following overseas international equity markets which saw news of a debt deal filtering through.

Despite staring down the barrel of financial capitulation, market movements in recent weeks reflect that the wider investment community were never in any real doubt that a deal would be struck and a 'financial meltdown' would be averted. Irritated further, in recent days by Fitch's decision to place the US credit rating on negative watch, offshore moves higher overnight signalled a collective sigh of relief as fears that the US would not be able to meet its debts are shelved for the immediate future. With the elusive US government deal bringing us back from the brink of the unthinkable default, participants may view this as a platform to test new highs in the short term.

With the US taper timeline seemingly backing into the distance amid the US debt saga and the Yellen nomination to the chair of the Fed, the Aussie dollar's climb close to US 96 cents has retreated and firmed in mid-95 US cent territory. The local unit has been bolstered further by the diminishing likelihood of further cuts in the near future as domestic policy makers watch previous easing measures continue to seep into the broader economy.

With US debt problems back on the bench for another day, the focus of investment community can return to 'bread and butter' economic releases. Of immediate concern, NAB Quarterly Business confidence due at 11.30am and quarterly production data from Newcrest, Fortescue and Woodside may provide ammunition for the local market while elsewhere, Philly Fed manufacturing data from the US in the early hours of Friday morning will be eagerly monitored.

With a raft of key readings from China expected on Friday lunchtime, headlined by Industrial Production and quarterly GDP, there may be a few more twists and turns for both the local sharemarket and dollar before the week is out.’

www.cmcmarkets.com.au

ENDS

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