The Nikkei Falls Below 14,000

Asian markets lost early gains as investor worry regarding a U.S. default grew. This comes as politicians made comments showing a lack of progress in solving the government shutdown. We are in the middle of a standoff. Who will blink first?

The shutdown is now entering day 7 today. We heard from House Speaker John Boehner who is vowing not to allow any vote about the debt ceiling without any negotiations about spending. He wants a “serious conversation” about plans to reduce Federal borrowing.

STOCKS
Despite comments from Boehner, U.S. markets finished up on Friday.

The DJIA gained 76 points. The Blue Chip Index is now back above the 15,000 level as it closed at 5,072.58. The S&P 500 was up nearly 12 points to close at 1,690.50 and the Tech heavy Nasdaq Composite was up 33.41 points to finish the week at 3,807.75.

The Japanese benchmark lost all gains from early in the trading day to fall below 13,990 points. A drop of over one percent. The Nikkei has now hit a new one month low in two straight trading days. The yen is not helping matters as it strengthened against the Dollar. The USD/JPY traded near $97 at one point.

The Australian S&P/ASX also lost more than one percent as it has hit its lowest level since September. The index traded on thin volume as several states were closed for a public holiday. South Korea’s Kospi is now below 2,000. The index tracked other steep losses throughout Asia even though we saw good economic data. Numbers show that foreign net investment/inflows have now hit a 20 month high.

CURRENCIES
The AUD/USD (0.9416) is up a bit as we are testing support near its current level. Should 0.9415 hold we could see a rise towards 0.9500. If it breaks, we target 0.9300.

The Sterling has recovered. The GBP/USD (1.6030) has risen after hitting a low at 1.600. We remain in its bullish channel and could test 1.6100 and then 1.6200. See below chart.

The USD/JPY (97.141) has managed to crawl back from today’s low near 97.00. Jacob Lew, Secretary of Treasury, has asked for the debt ceiling to be raised. This has helped to support the yen. The Yen has been strengthening since last week as it has been aiming for 96.95. We could target 99.00 at some point.

COMMODITIES
Brent WTI (109.12) is trading a bit sideways now as we rise towards 110.00 and then 110.50.

Gold (1330.10) moved higher as trepidation mounts over the debt ceiling. We are still moving sideways in a longer outlook. Copper (3.304) recovered from 3.2979. we are range bound from 3.200 to 3.3510 for now.

TODAY’S OUTLOOK
We are entering day 7 of the U.S. Government’s partial shutdown. Defense Secretary Hagel is recalling about 400K defense workers which might boost sentiment. However with the debt ceiling deadline fast approaching, all eyes and ears will be focused on the current budget stalemate.

U.S. will release consumer credit today as we have a light data day.