Debt Ceiling

Futures Tumbles Ahead Of US Government Shutdown

European equities trade negatively as political tensions on both sides of the Atlantic dampens risk appetite and a lower than expected HSBC manufacturing PMI figure from China further weighs upon investor sentiment. In the US, government is on the precipice of the first shutdown since 1996 after House Republicans refused to pass a budget unless it involved a delay to Obama’s signature healthcare reforms. If the Republicans follow through with their threat a shutdown will occur at midnight tonight. As a result a fixed income in the US and core Europe benefit with investors wary of the immediate harm a shutdown will do to confidence in the economy.

How The Market Reacted To Prior Government Shut Downs

With even the most compromising politicians on both sides of the aisle admitting at least a brief government shutdown is inevitable (and according to Stone McCarthy the shutdown will hardly be brief and will affect the timely release of such major economic indicators as construction spending, factory orders and the employment number on Friday), the next question arises: how have markets responded to not only shutdowns, but also debt ceiling impasse (with the memory of August 2011 still very vivid) in the past. Here is the full answer from Deutsche's Dominic Constam: "In a shutdown scenario, government agency-compiled economic data releases could be delayed, while essential services, such as Treasury auctions, interest and principal payments on Treasury securities will not be affected. Some federal workers could be furloughed. The most recent government shutdown occurred in late 1995 to early 1996, and lasted about three weeks. Payroll and retail sales data were delayed during that period."

The Government Shutdown Looms: A Q&A On What Happens Next (And Who Stays At Home)

With a government's October 1 shut down - temporary of course - now seemingly inevitable, and more importantly with the peak debt ceiling negotiations due in just about a week after which point the Treasury will run out of money, many wonder what comes next. That this is happening just two short years after the dramatic August 2011 debt ceiling impasse, when the market tumbled 20% and likely slowed economic growth is still fresh in everyone's mind, is hardly helping matters. Add a potential political crisis in Greece and Italy, and suddenly a whole lot of unexpected variables have to be "priced in."

"90% Odds of Government Shutdown" Democrats Warn

Following Nomura's estimate of a 40% chance of government shutdown yesterday, thanks to the pending vote for the Republican's "Obamacare-Delay" bill, Democrats note the odds of a shutdown of the government are now at 90%. A Democratic congressional aide added, "the only reason I’m not putting it at 100 percent is because nothing’s certain in American politics."  As we previously noted, this likely means the Fed will be flying blind at their next meeting with the BLS unable to "manufacture" jobs data for them to make their judgments.

Guest Post: Five Reasons Why Gold Prices Will Decline

This morning we received a research note from a private bank. Buried in the text was a call for lower gold prices, and the analysts listed five reasons why they think gold prices will decline. Our analysis? These guys are completely missing the point. Precious metals are like an insurance policy. It’s a policy you hope you’ll never need to cash in. But if the need ever arises, it’ll probably be because the financial system has collapsed. If that day ever comes, you’ll be thankful that you had the foresight to trade away some paper currency for real savings.

T-Minus 4 Days Till Government Shutdown: The Latest Summary

With government shutdown day (now in 3-D IMAX) just four days away, some are unsure what the latest developments are in the fluid and rapidly shifting landscape of Capitol Hill. For their benefit, here is a pithy but comprehensive summary of where we stand currently.

Obama's "You (Didn't) Shut That Government Down" Speech - Live Webcast

3:30 pm on a Friday, check. 4 days away before a possible government shutdown, check. Epic disagreement in the House over everything and anything, check. A president who can read but not really lead, check ("to you, Mr. Yellen"). So what comes next? The president takes the teleprompted podium, of course, and is about to do what he does best: blame the republicans. The only unknown: will the "middle class" people on the podium behind Obama be representative of the (non) deadbeat class whose credit cards have been cut off too?

Government Shutdown Odds: 40%, Nomura Estimates

In a world in which everyone has become an ultra-short term pathological gambler, and every outcome is a zero-sum prop bet, it was only a matter of time before someone tried to quantify the probability of the event that the market (for some inexplicable reason) is so transfixed on: the government shutdown (inexplicable, because anything more than a few day shutdown risks a full blown mutiny by the tens of millions of government workers). So without further ado, here is Nomura, with its "estimate" of a government shutdown on October 1: 40%.

Consumer Sentiment Plunges To 5-Month Lows; Biggest Miss Of 2013

Following the flash print's record miss, today's UMich consumer confidence came in below expectations (that had been cranked down from 81.9 to 78.0). At 77.5, it was the first miss in 2013 and the lowest print since April and the largest 2-month decline in 2013. This is the first consecutive monthly drop in 14 months and the largest miss vs expectations on record. Printing at 76.8 (against an expectation of 82.0), this is the lowest in 5 months and points to the picture we have been painting of a consumer increasingly affected by rising rates and soaring gas prices amid stagnant incomes. As Citi notes below, this is the exact same pattern we have seen play out in the last 2 cycles and suggest significant downside risk to US equities. The economic outlook sub-index collapsed to its lowest since April.

GoldCore's picture

‘Tapering’ may be put off indefinitely due to the very fragile state of the massively indebted U.S. economy. This means that interest rates must be kept low for as long as possible, leading to money printing and electronic money creation on a scale never before seen in history.

This will inevitably lead to higher gold prices - the question is when rather than if. 

Futures Fall On Government Shutdown Uncertainty

Following yesterday's modest bounce in equities punctuated by the traditional last minute spike, sentiment has reverted lower once again, driven by the uncertainty surrounding debt ceiling talks in the US, where lawmakers have until next Tuesday to agree to a spending bill, or much of the government will shut down. The Senate will vote on a spending bill later today, which will then be sent back to the House putting republicans in a quandary (Politico explains the complications surrounding the GOP's "Plan C"). It was reported that US House leaders are considering postponing action on a bill to extend the US government's borrowing power, with the leadership discussing a change of strategy to complete action on the stopgap spending bill before debating the debt-limit debate. In FX, GBP strengthened across the board this morning after BoE’s Carney said he does not see a case for more quantitative easing.

Pivotfarm's picture

Lew’s Illusions

US Treasury Secretary Jack Lew has warned Congress today that the US will be signing its own version of Auld Lang Syne on October 17th 2013