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Monday, October 7, 2013

FTSE LIVE: Markets turn red as US budget crisis drags on

PUBLISHED: 03:21 EST, 7 October 2013 | UPDATED: 05:41 EST, 7 October 2013

10.50: Losses in London deepened this morning with still no end to the US budget stand-off in sight – the FTSE 100 was down 56.2 points at 6,397.7 in mid-morning trading.

Alastair McCaig, market analyst at IG, says there is an increasing ‘fear factor’ in play as the US stumbles towards hitting its debt ceiling and poor Chinese economic data is reported.

‘The news that US politicians have again put self-interest ahead of the greater good of the country by failing to make any progress in sorting out the budget or tackling the debt ceiling will have surprised few.

US crisis: Polls show most American people are against the government shutdown

‘As yet the US debt markets have remained calm but the closer we get to the mid-October deadline the less likely that is to remain the case.’

Futures trading is also pointing to a sharp fall when Wall Street reopens this afternoon.

Monex Capital Markets said: ‘Any resilience financial markets were showing at the start of last week to the impending fiscal carnage in Washington has evidently vanished, with traders now seriously having to consider the fact that the money could run out in 10 days time.’

‘We’ve already seen short dated US bond yields [short term interest rates on US government debt] spike, the dollar is broadly finding itself under attack and global equities are plotting a course lower, too.’

It added: Expect every move from Washington to be watched with increasing scrutiny as the week unfolds, but if we don’t see any real progress then next week has the potential to be nothing short of chaotic.’

9.20:

The FTSE 100 has opened down 47.4 points at 6,406.5 as investors fret over the lack of progress in breaking a political stalemate over the US budget and debt ceiling.

US Democrats and Republicans came no closer over the weekend to a budget agreement that would end a government shutdown, let alone a deal on the borrowing limit needed by October 17 to avoid an unprecedented default.

Republican House Speaker John Boehner said he would not raise the debt ceiling without a ‘serious conversation’ about what is driving the debt. Democrats said it was irresponsible and reckless to raise the possibility of a default.

Many in the markets still expect a deal to be reached to avoid the potentially catastrophic fallout of a default by the world’s biggest economy. However, Asian markets were down overnight and top German and French markets have also opened in the red this morning.

‘We’re going to wobble our way down until about Thursday and then there’s going to be a solution and there will be a melt-up,’ predicted Justin Haque, a broker at Hobart Capital Markets.

Michael Hewson of CMC Markets said: ‘Financial markets continue to seem remarkably sanguine about the goings on in Washington as we head into day seven of the US shutdown.

‘This perception appeared to be reinforced on Friday with reports that Republican House leader John Boehner was determined to do all he could to avert a government default.

‘This prompted some suggestions that he might be prepared to push a bill through to end the budget deadlock and raise the debt ceiling with the help from the moderates within his own party and all the Democrats in the chamber, in defiance of the majority of his party.

‘Mr Boehner appeared to pour cold water on that speculation over the weekend by saying that he didn’t have the votes to pass an unconditional funding bill, adding to concerns that the two parties are becoming more entrenched than ever.

‘Mr Boehner’s comments that no votes would be held on either issue unless President Obama compromises on healthcare doesn’t really leave the Republicans much in the way of wriggle room as the October deadline looms, especially given that President Obama is unlikely to negotiate on what is one of his flagship reforms.

Mike van Dulken of Accendo Markets said: ‘The congressional stalemate shows no signs of progress with House Speaker Boehner adamant that a clean spending bill will not be approved while Treasury Secretary [Jack] Lew says congress is playing with fire putting the nation’s sovereign reputation at risk, on top of President Obama’s highlighting of the potential impact on fourth quarter GDP.

‘There are also fears that October could be a lost month for important official US macro [economic] data meaning November lacks a comparable and pushes analysis into December, possibly even January.

‘Rating agency Moody’s says US default [is] extremely unlikely with debt payments being made even after the deadline.’

Stocks to watch today include:

SERCO: The global outsourcing group faces a wide-ranging government investigation into its largest state contracts, the Sunday Times reported, adding that its UK and Europe chief executive Jeremy Stafford is expected to leave.

NATIONAL EXPRESS: The transport group said it had been shortlisted for a Berlin rail contract.

THOMAS COOK: The travel and tourism company said it had sold businesses serving customers in Egypt and Lebanon.

SABLE MINING : Guinea-focused iron ore miner Sable Mining said it had been granted permission to export through Liberia by the Guinean government, which could increase the viability of its Nimba project.

PETRA DIAMONDS : The company said it was on track to meet its production targets.

ADRIATIC OIL: The oil group said it aimed to list its shares on AIM.

Money | Mail Online

FTSE LIVE: Markets turn red as US budget crisis drags on

Friday, October 4, 2013

Focus on debt ceiling as U.S. shutdown drags on; Obama cancels trip

Empty tables and chairs are seen outside the main headquarters of FEMA, which is partially closed, during day three of the U.S. government shutdown in Washington October 3, 2013. REUTERS/Gary Cameron

1 of 9. Empty tables and chairs are seen outside the main headquarters of FEMA, which is partially closed, during day three of the U.S. government shutdown in Washington October 3, 2013.

Credit: Reuters/Gary Cameron

By Mark Felsenthal and Richard Cowan

Thu Oct 3, 2013 10:46pm EDT

(Reuters) – The shutdown of the U.S. government appeared likely to drag on for another week and possibly longer as lawmakers consumed day three of the shutdown with a stalling game and there was no end in sight until the next crisis hits Washington around October 17.

Bowing to the reality that the impasse requires him to remain in Washington, President Barack Obama canceled plans to attend summits in Indonesia and Brunei next week. Earlier this week, he canceled visits to Malaysia and the Philippines because of the shutdown.

October 17 is the date Congress must raise the nation’s borrowing authority or risk default, and members of Congress now expect it to be the flashpoint for a larger clash over the U.S. budget as well as President Barack Obama’s healthcare law.

The situation gives “every appearance of getting dangerously close to the conversation on the debt ceiling,” said Nancy Pelosi, the Democratic minority leader of the House of Representatives.

In fact, she said, “We’re in the conversation on the debt ceiling.”

At the same time, hopes that the debt ceiling fight could be resolved without a catastrophe were raised by reports in The New York Times and Washington Post that House Speaker John Boehner told other lawmakers he would work to avoid default, even if it meant relying on the votes of Democrats, as he did in August 2011.

A spokesman for Boehner would neither confirm nor deny the reports, restating previous public statements by the speaker that “the United States will not default on its debt.”

Senator Charles Schumer, the second-ranking Senate Democrat, reacting to the reports, said, “This could be the beginnings of a significant breakthrough.”

The New York senator added, “Even coming close to the edge of default is very dangerous,” as he urged quick passage of legislation to raise the $ 16.7 trillion cap on borrowing.

There was little action along with the talk on Thursday. The Republican-controlled House continued what has become a long process of voting to fund publicly popular federal agencies – like the Veterans Administration, the National Park Service and the National Institutes of Health – that are now partially closed.

Republicans know that neither the Democratic-controlled Senate nor Obama will go along with such an approach, but it allows them to accuse Democrats of working against the interests of veterans, national parks and cancer patients.

House Republicans on Thursday began lining up 11 more bills to fund targeted programs. They are to fund nutrition programs for low-income women and their children, a program to secure nuclear weapons and non-proliferation, food and drug safety, intelligence-gathering, border patrols, American Indian and Alaska Native health and education programs, weather monitoring, Head Start school programs for the poor and other aid for schools that rely heavily on federal assistance.

Disaster assistance also is slated for temporary renewal under the House measures, as well as a bill to provide retroactive pay to federal workers during the government shutdown.

“We’re trying to see if we can get the Senate and the president to start talking to us, on anything. They’re just not talking to us,” said Republican Representative Mario Diaz-Balart of Florida, explaining the tactic.

The bills are likely to be debated on the House floor over coming days, not all at once. Democrats have rejected the piecemeal approach and Obama has said he will veto the measures.

‘STOP THIS FARCE’

In a speech at a Maryland construction company on Thursday, Obama challenged Republicans to “stop this farce” by allowing a straight vote on a spending bill. He reiterated he will not negotiate on the spending bill or the debt ceiling.

Obama said there were enough Republicans willing to pass a spending bill immediately if House Speaker John Boehner would allow a vote on a bill without partisan conditions attached, a so-called clean vote. But Obama said the speaker was refusing to do so because “he doesn’t want to anger the extremists in his party.”

“My simple message today is ‘Call a vote,’” Obama said. “Take a vote. Stop this farce, and end this shutdown right now.”

Work in Congress was interrupted on Thursday afternoon when the U.S. Capitol was locked down briefly due to gunshots fired outside the building. One female suspect was shot dead after a brief car chase across downtown Washington. Police said it appeared to be an isolated incident.

The security alert halted work in both the House and the Senate and briefly diverted attention from the shutdown that took effect at midnight on Monday, leaving nearly a million federal workers sidelined without pay and many others in the private sector suffering from the knock-on effect.

The Capitol Police who responded to the incident are working without pay due to the shutdown – they are deemed essential and so remain on the job, but their pay is frozen.

ECONOMIC WARNINGS

In his speech earlier, Obama warned that as painful as the government shutdown was, a default caused by a failure to raise the debt limit would be dramatically worse for the economy.

Alhough some moderate Republicans have begun to question their party’s strategy, Boehner so far has kept them largely united with the small bills to reopen national parks, restore health research and other parts of the government most visibly affected by the shutdown.

The Tea Party Express, one of the anti-tax groups in the conservative Tea Party that has led the fight against Obamacare, sent an email to supporters on Wednesday evening saying that as many as 12 Republicans had indicated they were willing to “give up on the fight” and join Democrats in voting for a funding bill without conditions.

“We need your immediate support to put pressure on the weak Republicans to pass a sensible solution that allows America to avoid the Obamacare train-wreck, while fully funding the federal government,” the group said in its email.

The U.S. Treasury warned on Thursday about the “catastrophic” impact of a debt default, saying a failure to pay the nation’s bills could punish American families and businesses with a worse recession than the 2007-2009 downturn.

Major stock markets fell on Thursday, while the dollar dropped to an eight-month low over concern the budget standoff would merge with the coming fight over raising the U.S. borrowing limit.

The U.S. Labor Department on Thursday said the government’s September employment report, the most widely watched economic data both on Wall Street and Main Street, would not be released as scheduled on Friday due to the shutdown.

Despite the shutdown, Republicans have failed to derail Obama’s controversial healthcare law, which passed a milestone on Tuesday when it began signing up uninsured Americans for subsidized health coverage.

Obama blamed the shutdown on Republicans’ “obsession” with reversing healthcare reforms passed in the Affordable Care Act, but noted they had been passed by the House of Representatives and the Senate and been deemed constitutional by the Supreme Court.

“Last November, the voters rejected the presidential candidate that ran on a platform to repeal it,” he said on Thursday. “So the Affordable Care Act has gone through every single democratic process, all three branches of government. It’s the law of the land. It’s here to stay.”

(Reporting by Richard Cowan, Steve Holland, Jeff Mason, Susan Heavey, Jessica Wohl; Writing by Fred Barbash and Claudia Parsons; Editing by David Storey, Tim Dobbyn and Peter Cooney)

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Reuters: Politics

Focus on debt ceiling as U.S. shutdown drags on; Obama cancels trip

Monday, October 7, 2013

FTSE LIVE: Markets turn red as US budget crisis drags on

Stocks to watch today include:

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Friday, October 4, 2013

Focus on debt ceiling as U.S. shutdown drags on; Obama cancels trip