Julex Market Weekly 09-29-2013 | The Government Shutdown is Looming

Top Stories Last Week

• US Stocks Dropped as Congress Could not Reach an Agreement on New Budget

The US stocks dropped as Congress could not reach an agreement on the new fiscal year budget. The government may face shutdown if no deal is agreed by Monday. The uncertainty made the markets jittering. In the week, S&P index dropped 1.1%, and MSCI EAFE index remained unchanged. The MSCI Emerging Market Index declined 2.2%. However, gold was up by 0.8%, but the SPGC commodity index dropped 1.3%. The bond markets continued rising as the Ten-year Treasury rate moved lower. Barclays US Treasury index was up 0.9%, but US high yield bonds was down0.6%.

• UK GDP Grew at 0.7% in the Second Quarter

The UK gross domestic products growth was estimated to be 0.7% in the second quarter. The economy is firing all cylinders, with each of the three key sectors – services, production and construction – growing. However, the growth over the past 12 months was slower than previously thought. GDP expanded by just 1.3% in the last year, rather than the 1.5% previously calculated. Economists remained optimistic about prospects for the rest of 2013, as high frequency data showed that the recovery is gaining momentum.

• Japanese Inflation Rate Accelerated to 0.8% on Weaker Yen

Japan’s inflation rate accelerated to the fastest pace since 2008 in August on higher energy costs. Consumer prices excluding food increased 0.8% from a year earlier. The median forecast of 30 economists surveyed was for a gain of 0.7%. Taking out energy and food, prices fell 0.1%. The yen’s 20% slide against the dollar this year pushed up fuel costs. While the data point to early success for Prime Minister Abe’s campaign to end deflation, but he will have to keep up his efforts on companies for wage growth in order to keep the economy moving.

• US Durable Goods Orders Barely Grew in August

Durable goods orders barely grew, at 0.1% in August, driven by rise in vehicle orders. It may indicate that the companies are holding back on investments due to uncertainty over government spending. The reading for these so-called “core” shipments feeds directly into the government’s estimates for total economic growth. The slow growth in durable goods orders created concerns about Q3 economic growth.

Top Stories to Watch This Week

• Government Shutdown is Looming

The Republican-controlled House of Representatives early today passed a measure that ties government funding to a one-year delay of so-called Obamacare. Senate Democrats have vowed to veto it. If a spending bill for the new fiscal year is not passed before midnight on Monday, the non-essential government agencies and programs will close for the first time in 17 years.

• Chinese and US Manufacturing PMI

The manufacturing activities in both US and China are expected to continue expansion.

• ECB and BOJ Monetary Policy Meetings

European Central Bank and Bank of Japan will keep interest rates unchanged, according economists’ survey.

• US Employment Report

US employers are likely to add 179K jobs in September and jobless rate will remain at 7.3%.