Spreadex Market Analysis: Dow Sinks, Asian And European Markets Stable

AM Analysis – “US government partial shutdown after failure to agree new budget” – Lee Mumford
The US government has begun a partial shutdown after senators failed to agree a new budget for next year. The midnight deadline passed without agreement despite President Barack Obama’s last minute efforts to reach a deal. The shutdown threatens more than 700,000 US government workers who could end up on unpaid leave. However, despite a large downside move on Sunday evening, markets seem little fazed with many investors expecting the two sides would strike a deal imminently.

Asian stocks recovered overnight despite the uncertainty in the US after Japanese Prime Minister Shinzo Abe said the nation will increase its sales tax as planned. Abe said he had decided to raise the sales tax as planned from April 1 next year to 8 percent from the current 5 percent to help sustain the country’s public finances.

WTI crude slid for a third day on uncertainty the US government will fail to reach a deal, threatening to slow the economy and reduce the demand in the world’s largest oil consumer.

PM Analysis – “Dow sinks while Asian and European markets remain stable as US government shuts down” – Alex Conroy
In a failure of bi-partisan politics the US government has entered a state of shutdown. A Republican plan to enforce cuts to Obama care has left the two sides in a deadlock and up to 800,000 employees on unpaid leave. With the Dow sinking 0.79% in anticipation of a lockout yesterday and Asian and European markets remaining fairly stable this could indicate the markets have already reacted to the news. The wider implications for the World Economy are the major concerns with growth in the US expected to be reduced by 1.4%.

There is worry that the partial government shutdown will kill any momentum in discussions about the debt ceiling. With the deadline getting ever closer, October 17th, any distractions from the topic could increase the likelihood of a government default.

Gold speculators are practically frothing at the mouth in anticipation of huge price movements with a flight to gold a very real possibility the longer the shutdown drags on. Other investors however believe that should gold fails to rally in these economic conditions this will demonstrate the underlying weakness of the metal and could lead to a further sell off.

The original articles by Spreadex can be found here.

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