Day two of the US government shutdown and markets remain confused, cautious, but with a touch of real concern starting to appear at the edges.
President Obama met Congressional leaders for talks on the shutdown, but the President said he would not negotiate.
Wall Street suffered small losses (fell by around 0.4% for the Dow), but closed off earlier lows.
There’s a growing concern the shutdown will continue towards the October 17 deadline for the debt ceiling, complicating the issue.
There seems to be a feeling that if the shutdown is still happening at the end of next week, then markets will become very concerned and start selling off.
Gold jumped $US30 an ounce to $US1,317 an ounce and oil rose as well, reversing the previous day’s weakness.
The US dollar weakened with the euro hitting an eight month high.
The Yen also rose and the Aussie dollar traded around 93.80 USc and was edging its way back towards 94 USc.
Asian trading was mixed, while the Aussie market edged higher.
But the Tokyo market shed 2.2% on fears about a move to boost the country’s version of the GST from 5% to 8% next year.
The European Central Bank left its key interest rate unchanged, and European markets were also mixed, but Italy was solid as Silvio Berlusconi blinked and backed the government of Enrico Letta instead of destroying it.
But attention remains on the US and Washington where the shutdown continued with no sign of a breakthrough, though millions of people continued to access the various websites for the new health care system, indicating a high level of approval and confidence in the idea which the tea party Republicans want to defund.
President Obama cancelled his trip to Malaysia and the Philippines, but his trip to Indonesia remains current.
Investors are now focusing more on the debt ceiling brawl which goes live around October 17.
In a letter to Congressional leaders, US Treasury Secretary Jack Lew said that the government shutdown will not extend the deadline that he first estimated late last month "unless it continues for an extended period of time".
Lew said the Treasury was now using its final extraordinary measures to ward off the debt ceiling.
He repeated that Treasury would have $US30 billion in cash on hand on October 17, and would be at risk of not being able to pay its bills. Mr Lew pointed out that on some days, the US government paid out up to $US60 billion.
"If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history," he said.
Back home and two bits of data from the Australian Bureau of Statistics yesterday showed that dwelling approvals weakened in August for private houses and for flats and apartments. But private house approvals remains 10.3% higher in the year to August, while the country’s trade deficit improved.
The seasonally adjusted estimate for private sector house approvals fell 1.6% (to 8,115 houses) in August following a rise of 2.7% in the previous month.
The trade deficit was $815 million in August, compared to a $1.375 billion deficit in July (which nearly doubled on revision from the first estimate a month ago).
In Australia, the ASX200 index rose 8.8 points, or 0.2%, to 5215.6, while the All Ordinaries index gained 8.6 points, or 0.2%, to 5214.9.
But after the weakness on Wall Street this morning, our market will open softer.
