Market Primer: Thursday, October 3: Third Day Of US Government Halt Drags On The Dollar
The gridlock between Democrats and Republicans in the US looked unlikely to ease as the US headed into its third day of a Federal government shutdown.
The dollar fell to eight month lows on the government’s failure to pass an emergency spending bill, but share markets were resilient as most are expecting central banks to maintain accommodative monetary policy in light of the US’ struggle.
The shutdown hasn’t made a huge dent in the global economy just yet, but a Fitch Ratings report out on Tuesday warned that if the stalemate persists, confidence in the US could be undermined.
In other news around the markets:
- Italian Prime Minister Enrico Letta won a confidence vote on Wednesday and avoided the disintegration of his fragile coalition government. Silvio Berlusconi, who had called for his People of Freedom ministers to resign from Letta’s government, abandoned his effort to topple the coalition in a surprising turn of events. Although Letta’s five month old coalition will continue, the political struggles in Italy are far from over as the country attempts to repair its economy.
- Amid growing concerns about North Korea’s nuclear capabilities and more frequent terrorist activity, the US and Japan reworked their defense guidelines and added a second ballistic defense radar to Japan’s western coast and increased the US’ presence in Guam by 5,000 marines.
- The International Monetary Fund could lose some of its credibility at next week’s annual meeting as emerging markets will likely express their frustration over the lack of progress on changes which would allow them more power as their economies expand. The IMF agreed to cut some of Europe’s representation on the board and replace it with emerging markets, giving them a greater say three years ago.
- Securities and Exchange Commission Chairman Mary Jo White raised questions about self-regulation among stock exchanges in a speech at a trading conference in Washington. White pointed out that stock and options exchanges have evolved into for-profit organizations that compete with each other; and that their regulatory responsibilities have become secondary.
Asian markets were mostly higher on Thursday as emerging markets improved due to the US government shutdown. Indonesia’s JSX composite gained 0.71 percent and the South Korean KOSPI was mostly flat. The Japanese NIKKEI had a minor loss of 0.09 percent.
European markets were mixed on Thursday. The UK’s FTSE was up 0.24 percent and the eurozone’s STOXX 600 was mostly flat. The Spanish IBEX lost 0.18 percent and Italy’s MIB gained 0.11 percent.
Energy futures lost out on Thursday, Brent futures were down 0.08 percent and WTI futures lost 0.38 percent. Gold and silver fell 0.73 percent and 1.17 percent respectively; industrial metals were mostly higher with aluminum up 0.60 percent and copper up 0.12 percent.
The dollar lost out on Thursday, under pressure from the US government shutdown. The euro gained 0.25 percent against the dollar and the pound gained 0.04 percent against the greenback. The dollar improved against the yen, up 0.39 percent.
Notable companies that reported earnings on Wednesday included:
- Monsanto Company (NYSE: MON) reported a loss of $0.47 per share on revenue of $2.20 billion, compared to last year’s loss of $0.44 per share on revenue of $2.11 billion.
Stocks moving in the pre-market included:
- Perrigo Co. (NYSE: PRGO) added to its 1.60 percent increase over the past five days and gained 0.54 percent in pre-market trade.
- WeyerhaeuSer REIT (NYSE: WY) lost 6.47 percent in pre-market trade after improving 1.89 percent over the past week.
- Charles Schwab Corp (NYSE: SCHW) was down 5.26 percent in pre-market trade after a week of chopping trading.
- Teradata Corp (NYSE: TDC) fell 5.20 percent in pre-market trade, adding to its 4.62 percent drop over the past week.
- L-3 Communications Holdings Inc (NYSE: LLL) was down 5.17 percent in pre-market trade, a sharp drop after yesterday’s 0.88 percent gain.
Earnings Reports Expected On Thursday Include:
- Xyratex Ltd. (NASDAQ: XRTX) is expected to report EPS of $0.05 on revenue of $209.31 million, compared to last year’s EPS of $0.37 on revenue of $275.67 million.
- Texas Industries, Inc. (NYSE: TXI) is expected to report EPS of $0.01 on revenue of $233.6 million, compared to last year’s loss of $0.09 per share on revenue of $191.81 million.
- Constellation Brands (NYSE: STZ) is expected to report EPS of $0.88 on revenue of $1.53 billion, compared to last year’s EPS of $0.71 on revenue of $698.50 million.
With the US government shutdown, several economic releases will be delayed. However, the Labor Department confirmed that US continuing and initial jobless claims will be released as expected. Other notable economic releases from around the world include eurozone retail sales, and services PMI from Spain, Italy, France, Germany and the eurozone as a whole.
For a recap of Wednesday’s market action, click here
Tune into Benzinga’s pre-market info show with Dennis Dick and Joel Elconin here
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