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Jobless benefit claimant numbers drop
Progress or the lack thereof on Capitol Hill was always going to be the main driver in global equity markets today. While there was consensus that a debt ceiling extension would be seen, uncertainty still weighed on equity markets this morning. Fitch ratings agency placing the US AAA rating on negative watch may well have been the catalyst for some sort of debt ceiling resolution in Washington, as reports of a cross-party bill to raise the debt limit and reopen the US government have surfaced.
European investors, with few corporate earnings on the calendar, focused on the meatier aspects of the UK and eurozone economies.
The number of people claiming jobless benefits in the UK fell by 41,700 in September, beating expectations for a drop of 25,000. The fact that, in addition, unemployment remained static at 7.7% from June to August does give some credibility to the Bank of England’s commitment to keep rates on hold until 2016 – assuming one ignores the inflation issues.
The European Central Bank has a rather different problem to the UK, and eurozone inflation – nowhere near the 2% mandated level – is clearly indicating that Mario Draghi will need to add some liquidity to the system if deflation is to be avoided.
Hargreaves Lansdown's shares price has added 4.76%, pushing it to a 52-week high, following reports that the company held a record level of assets under management in its Q1 update.
The metals and mining industry has had to deal with a very volatile precious metals sector as the gyrations in the dollar and uncertainty weighs. Not surprisingly, Fresnillo and Polymetal International took the bottom rungs of the FTSE ladder today, losing 1.68% and 4% respectively.
Dow surges 200 points
The S&P 500 is trading less than 1% from its all-time high, having surged on governmental procrastination with a much relieved financial sector leading the charge. The Dow Jones added over 200 points as trade volume returned and traders took advantage of the upbeat sentiment. It is now trading at 15,349.
The lynchpin of the US recovery appears to be faltering; data released today revealed that the National Association of Homebuilders (NAHB) index fell to 55 in October from last month’s 57. It is evident that recent shenanigans may be denting confidence. One could expect that consumer spending, another important tenet of the US economy, will also suffer.
The Beige Book due out later this evening is always a favourite of traders, and while nobody is expecting a hike in US base rates anytime soon it may provide some clues to the (very unlikely) prospects of QE tapering this year.
Dollar gains 0.5%
The US dollar held steady today despite the rise in the pricing of credit default swaps, and the bounce-back has seen the greenback gain 0.5% overall. Sterling had a brief look above the 1.60 level against the dollar after the unemployment news but failed to maintain its lofty position owing to the feeling that interest hikes are unlikely in the near-term from the Bank of England.
Copper prices put in a one-week high despite news that there is a supply glut. The dollar helped to push the base metal higher. One could expect that the effect of the shutdown of the US economy will become apparent in later months and may well weigh on prices.