Markets softer over political uncertainty

Global markets are notably softer today, as yesterday’s investor complacency is replaced with caution. With quarter-end and continuing uncertainty about the longevity of the US government shutdown, investors have resolved to take some profits.

Beslusconi U-turn boosts Italy

It’s akin to entering a type of twilight zone when the world witnesses a quick fix in Italian politics, while the US languishes in uncertainty. Today's Berlusconi U-turn was deemed positive for Italy, politically and economically. Prime minister Enrico Letto won the confidence vote and so the market can expect to see the necessary Italian budget reforms.

The ECB rate decision and press conference was brought forward by a day due to a German bank holiday tomorrow. Rates were kept on hold and if Mario Draghi wanted to see the single currency push lower, he was sorely disappointed as it broke to an eight-month high against the US dollar.

UK construction output for September was below expectations, but the fact that it remains well above the pivotal 50 level that separates expansion and contraction continues to indicate that the UK economy is firing on all cylinders, which in turn helped to push the pound higher yet again against the dollar.

The mining sector recouped some of their losses from yesterday, with Fresnillo and Randgold Resources both higher as metal prices recovered and bargain hunters swooped in. The weak European economy and increased competition subjected Tesco to a broker downgrade today. The shares have pushed comfortably off their lows but remain down almost 1% on the day.

US jobs data disappoints

A greater degree of importance was assigned to the US private payrolls number today, given that the grandaddy event of the macro calendar, the release of the non-farm payrolls, has been postponed to a later date. The figures were disappointing, showing a rise of 166,000 in September while the consensus was for an increase of 180,000. Equity markets were already in decline prior to the release, but the softness in the jobs market added to the woes.

Clearly some firms are benefiting from the governmental furlough and long-term US unemployment. Movie streamer Netflix added over 2% today and posted a new all-time high. The Dow Jones is currently trading down 128 points at 15,063.

EUR/USD hits eight-month high

The euro pushed to an eight-month high against the US dollar as Mario Draghi failed to adapt a sufficiently dovish tone. Despite the fact eurozone inflation is well below the ECB's target and that European growth could do with some added stimulus, it now appears that any LTRO plans are on the back-burner until bank stress tests are completed.

Gold price soars

The precious metals sector, subjected to a blast of selling yesterday, made a big comeback today. As the speculation of imminent QE reduction tapered off, the weaker dollar and bargain-hunting saw gold add over 3.5%. Almost everyone has an opinion on where the gold price will go, but for now one would expect that the safe-haven of the metal will still have an appeal, so long as there are questions about the US debt ceiling.

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