Market update: US government averts default – for now – 17.10.2013

Source: Henderson Global Investors

US stocks staged a rally last night (S&P 500 and Dow Jones both +1.4%, Nasdaq +1.2%) as politicians struck an eleventh hour fiscal deal. The federal government will reopen until 15 January and the debt ceiling will be suspended until 7 February. Additionally, 13 December was set as the deadline for the completion of budget deficit reduction discussions. However, this means another round of political brinkmanship could be in store over the year-end holiday season. Credit rating agency Standard & Poor’s estimates that the more than two-week long government shutdown will have cut annualised fourth quarter US economic growth by 0.6%. In third quarter earnings news, Bank of America’s earnings surged, while tech stocks Yahoo! and IBM’s profits increased.

Elsewhere, overnight Australia’s S&P/ASX 200 climbed 0.4% and the Nikkei gained 0.8%, however, the Shanghai Composite and Hang Seng both closed down 0.2%, after initial gains.

This morning, European markets appear to be unimpressed by the developments in the US; the FTSE Eurofirst 300 and FTSE 100 are both down 0.5%. In Germany, political uncertainty lingers with the German Green party’s withdrawal from coalition talks with Angela Merkel’s CDU (Christian Democratic Union). Meanwhile, shares of Dutch telecoms group KPN are down as Mexican billionaire Carlos Slim failed to take over the group.