Republican stranglehold on US Government continues
US share markets edged higher on Friday night.
The S&P 500 index trimmed a weekly decline, as some optimism grew that US lawmakers would reach a deal to end the budget impasse.
Investors were encouraged by media reports (earlier on Thursday) that House Speaker John Boehner had told lawmakers he will ensure there is no default, even if it means relying on the votes of Democrats.
At the close on Friday, the S&P 500 was up 0.7% and the Dow Jones was 0.5% higher.
Jitters about delayed payments on short-term government debt, or a technical default, spread to more T-bill issues. Interest rates on bills that mature in the first half of November last traded at 0.1%, four basis points higher than late Thursday and up 8 basis points from a week earlier.
The fact that November T-bills are feeling a little bit of pressure suggests the market is becoming a little more concerned.
While the ongoing government shutdown and the looming debt ceiling deadline have roiled the T-bill sector, longer-dated government securities have held in a tight range, suggesting traders are clinging to hopes for a deal to avoid a default.
The yield on benchmark US 10-year Treasury notes closed four basis points higher on Friday. Meanwhile, the yield on the two-year note finished two basis points higher.
The US dollar lifted from an eight-month low on Friday. The euro had looked to be eyeing up its 2013 peak of $1.3711 in Asian trading, but as the US dollar began to firm in Europe the single currency dropped back to touch a low of USD1.3539. The GBP/USD fell from near 1.6180 to touch a low of 1.6006 on Friday night trading.
The Australian dollar was volatile within a narrow trading range of USD0.9421 to USD0.9459.
The AUD withstood the move higher in the USD on Friday night better than the G4 currencies.
Demand for the AUD was encouraged by a growing shift in market expectations that the Reserve Bank may hold off on cutting rates again this year.
The AUD will likely try to test higher in coming days if the US impasse continues, but strong resistance at the USD0.9460 level might initially hold the AUD back.
Commodity markets remained choppy. Oil prices moved higher as Tropical Storm Karen pushed through the Gulf of Mexico to the US coast, threatening crude production in the region.
Gold was slightly weaker and copper prices stabilised after a hefty fall on Thursday.
There was no major economic data or events on Friday locally.
Eurozone producer prices fell by 0.8% in the year to August.
It is the weakest annual pace since January 2010, indicative of diminishing price pressures, also reflected in the lower CPI.
The ISM's gauge of non-manufacturing dropped to a three-month low of 54.4 in September, from 58.6 in August.
This index indicates that services industries grew at a slower pace in September as more corporate purchasing managers grew concerned about the US economy in the lead up to the government shutdown.
The US Department of Labor postponed the release of the closely-watched non-farm payrolls data due to the government shutdown.
The postponement had no noticeable market impact.
US House of Representatives Speaker John Boehner said on Sunday that there is "no way" Republican lawmakers will agree to a measure to raise the nation's debt ceiling unless it includes conditions to rein in deficit spending.
As the country moved into the sixth day of a government shutdown, Boehner was equally adamant that Republicans would demand concessions for any bill to reopen the government.
Republicans want changes to President Barack Obama's signature healthcare law known as Obamacare as a condition for backing a measure to fund government agencies. Obama and the Democratic-led Senate have rejected that demand.
Obama has also said it is the responsibility of Congress to raise the debt limit by an October 17 deadline when the government will begin running short of the funds needed to pay its bills.
He has said he will not negotiate with Republicans over that issue.
On the impasse over the government shutdown, Boehner said there had "absolutely not" been any changes in the Republican position on the bill to fund the government.
We published a detailed report on Friday that discussed the debt ceiling in detail. Please refer to it for a look at the implications on the economy from the shutdown and the possibility of a default and what it would mean.