The Us Government Shuts Down

Approximately 1 hour ago, the U.S. Office of Management and Budget began issuing orders to begin a government shutdown.

House Republicans and Senate Democrats are locked in a war of wills that have shut down the Government of the United States of America. This leaves hundreds of federal services now unavailable to the American public.

The Senate wants what it is calling a “clean bill” in order to continue government funding. They want no strings attached and the House wants to tie any resolution to the defunding of the Affordable Care Act (Obamacare).

Although Obama called for it, there was no 11th hour vote that came to save the day and now more than 700,000 employers under the U.S. Government will have unpaid leave.

In Japan Manufacturers sentiment gained drastically after the BOJ’s Tankan survey was released showing a rise in the index to 12 in the last quarter from 8 in the previous quarter. The PM of Japan Shinzo Abe has said that sales tax will rise to 8 per cent in April. The current figure is 5 per cent and then by 2015 if it moves according to government plans it wil be at 10 percent by 2015.

In China it was reported that the ~Chinese manufacturing PMI data gained to 51.1 in September from 51 in the previous month which fell under expectations of an increase to 51.5.

STOCKS

And so it begins…
U.S. markets were sharply lower on shutdown fears overnight. This is the first U.S. Government shutdown in almost 17 years. Still the major indexes saw good monthly and quarterly gains.

The DJIA lost 128 points to close at 15,129.67. The index has now fallen seven times in eight days. For the month, the Dow Jones was up over two percent. The S&P 500 lost 10 points to finish at 1,681.55 and the Nasdaq Composite lost 10 points as well to close at 3,771.48. For the month, the Nasdaq Composite was up over five percent and the S&P 500 was up nearly three percent.

In Asia, Chinese financial markets are closed for a week long holiday.

Japanese shares outperformed as japan showed good corporate data. The Nikkei 225 jumped one percent in trading. The Kospi saw modest gains and he Australian benchmark was flat today. Gains were capped as the shutdown loomed.

Other risk assets are surprisingly calm for now. U.S. stock futures were up about 30 points at the time of this report and the USD/JPY moved off yesterday’s one month low. The Euro has now gone above 1.3500.

CURRENCIES
The yen has weakened and the Euro and Sterling have strengthened.

The USD/JPY (98.272) recovered from yesterday one month low at 97.50. This confirms the range bound trading as investors are not committing to a trend right now. We are locked from 97.78 to 99.50 for now. See the below chart.

The EUR/USD (1.3535) has support at 1.34880 and looks to be aiming for 1.3600. First, the temporary top at 1.3569 has to be broken. It is unclear whether or not 1.3600 will break. The GBP/USD (1.6237) has gone above 1.6200 and can now challenge 1.6300 with a break higher testing 1.6350.

COMMODITIES
Commodities are down as the U.S. Government closes its doors.

Gold (1328.70) fell as investors were worried the shutdown would be short lived. Expect a recovery now. We have resistance at 1350 which should be targeted today. However, we could see range trading from 1300 towards 1350 for the next few days. Outlook is unclear.

Copper (3.32) is near term bullish and could test 3.3700. We think this level should hold bringing us lower for 3.3200.

TODAY’S OUTLOOK
Congress missed the deadline at midnight. President Barack Obama and the White House has now ordered the first government shutdown in nearly 17 years. Expect a rocky day of trading as both the Republicans and Democrats will continue to fight it out to keep this shutdown brief. The major sticking point is Obamacare.