Market Update: Mild reaction to US shutdown – 01.10.2013

Source: Henderson Global Investors

US stocks fell on Monday (S&P 500 – 0.6%, Dow Jones -0.8%) as the Democrats and Republicans were unable to reach an agreement on the budget, leading to a partial government shutdown. It is reported that around 800,000 federal workers could be out of work from Tuesday. In addition to the budget, the US debt ceiling needs to be addressed as the government is likely to reach its borrowing limit by mid-month.

Japanese stocks were initially buoyed by an upbeat Tankan survey. The latest quarterly gauge of business confidence in the manufacturing sector beat analyst forecasts, rising to 12, the highest reading since 2007. However, these gains were later limited by prime minister Abe’s announcement the government will go ahead with a planned consumption tax rise, which some fear will dampen domestic demand. The Nikkei ended up 0.2% today. Elsewhere, markets in Hong Kong and China are closed for holidays for the rest of the week.

This morning European markets are holding steady despite the US budget turmoil (FTSE Eurofirst 300 +0.3%, FTSE 100 -0.3%).