Washington Stalemate Moves Markets Lower

The partial closure of the U.S. Government over a budget issue is now entering its third day. There are an, estimated, 800K federal employees out of work till a resolution.

There is a bigger problem now looming for the U.S. Just down the road, on October 17, Congress will meet on the debt ceiling. So far, they cannot agree on the budget, what happens when and if they do not raise the debt ceiling? The U.S. defaults on debt for the very first time.

We also see another problem with the soft batch of economic numbers being reported in the U.S. Yesterday we got a weaker than expected jobs report. The Private sector only added 168K jobs. We expected 180K. The ADP is a leading indicator of tomorrow’s NFP report due out tomorrow.

STOCKS
U.S. markets did ease off session lows but closed in the red. The DJIA lost 58.56 points to close just above a key support at 15,100. We ended trading at 15,133.14. The Dow was down nearly one percent at one point.

The S&P 500 lost one point to close at 1,693.87 and the Nasdaq Composite fell nearly 3 points to end at 3,812.02.

Asian markets saw thin trade this morning as Chinese financial markets, including Hong Kong are closed the week for a national holiday. The Nikkei 225 in Japan is continuing to hover around a three week low hit yesterday as we saw a two percent selloff. The strengthening yen is not helping matters. Today the Bank of Japan (BOJ) began its two day policy meeting.

The Australian S&P/ASX was up 0.6 percent. The Philippine PSE lost one percent and the Indonesian benchmark fell 0.6 percent on the day.

European markets were generally weaker yesterday as traders are fretting over the U.S. shutdown. Italian stocks recovered as Prime Minister Enrico Letta won his no confidence vote by a huge margin.

CURRENCIES
The EUR/USD (1.3608) rose against the buck as we now look to target 1.3650. Above that can test 1.3700. We see strong resistance coming up here which could see us dip to 1.3500. The GBP/USD (1.6238) continues to push higher. Good construction numbers in the UK is lending support. We are aiming got 1.6300 and then 1.6350. Strong resistance lies at 1.6400 which should cap gains. See below chart.

The USD/JPY (97.500) has fallen a bit and is now testing the support at 97.50. If it holds expect a rise back to 98.50 and the 98.75 where it would range trade for a period of time.

COMMODITIES
Gold (1311.80) continue to decline. It has gone out of the range trade of 1300 towards 1350 and we have no clear direction as of right now. A break of 1300 will bring us towards 1250.

Silver (21.725) has also fallen as resistance at 21.95 is holding. We could dip towards 21.00 at this point. Copper (3.311) is up and bullish. We are aiming for 3.35 at this point.

TODAY’S OUTLOOK
We are still waiting on a budget compromise in the U.S. as the closure is now in its third day. As wrangling, and it is bitter infighting at this point, continues, 800K workers remain without pay and government services remain closed. October 17 is just around the corner and if they cannot agree on the budget, what happens with the debt ceiling?

Today is another busy data day as we get U.S. job cuts, jobless claims, factory orders ISM number and two Fed Governors speak as well.