(As of 7:20 am PST)
Markets seem to be taking the news of a US government
shutdown in stride this morning as US indexes opened higher while ‘safe havens’
such as US treasuries and gold were lower.
US lawmakers failed to reach an agreement on a federal budget late last
night causing the first US government shutdown in 17 years. The shutdown means temporary unpaid leave for
hundreds of thousands of federal employees all across the nation. Although many believe the gridlock in Washington
will be short-lived the economic impacts could be significant. The next, and arguably more important piece
of the financial debate on Capitol Hill, is the debt ceiling. If the shutdown impedes Congress’ ability to
raise the debt ceiling by October 17th the US would default on its debt. The result of a US default would be devastating
for the global economy. Several economic
data reports due out today have been delayed as a result of the shutdown. Friday’s jobs report issued by the Labor
Department will also be delayed if the government is not re-opened by
then. With very little data to trade on,
expect market gains to deteriorate as the day goes on and investors weigh the
ramifications of what’s happening in Washington.
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