The US shutdown and debt ceiling stalemate drags into its second week, affecting overseas markets.
The Market isdown 16 points. Dow Jones closed down 136 — US stocks were sold off as the partial US government shutdown entered its second week with no sign of resolution, spooking investors. Analysts are concerned the stalemate may prevent the raising of the debt ceiling, resulting in a US default with damaging economic consequences.
Speaker John Boehner said yesterday that the House of Representatives can’t pass a debt ceiling increase without packaging it with other provisions. Boehner confirmed that the country could default if President Barack Obama doesn’t negotiate. Obama urged Republicans to raise the debt ceiling by next week. He says he is willing to negotiate once the debt ceiling is raised and government is reopened. The partial shutdown caused the delay of the US Jobs data. Should the shutdown continue, economic data such as retail sales and August trade could also be postponed. US Consumer credit was up by $US13.6 billion in August to $US3.04 trillion, above an expected $US12 billion. Credit card use fell for the third month with revolving credit down by $US883.4 million.
Share price movements — Boeing -0.5% after losing an order to rival Airbus. Blackberry +3.6% on reports that several technology companies were looking to acquire the smartphone maker.
US treasuries were mixed. US 10-year yields fell by 2% to 2.63%.
The US dollar fell against most major currencies.
The Aussie dollar rose from its low near US93.85c to highs of around US94.45c before ending US trade near US94.25c. The dollar is now trading at US94.31c.
Spanish 10-year bond yields were unchanged, Portuguese 10-year bond yields were down two basis points to 6.38%.
The iron ore price was unchanged at $US131.40 a tonne with Chinese markets still on holidays.
European markets fell overnight in thin trade as investors looked for signs of an end to the US budget dispute.
Mining shares fell — RIO down 0.3% and BHP down 0.1%.
Base metal prices were mixed on the LME.
Gold was up $13.1 to $1323 per ounce.
Oil was down 68c to $US103.16.
New solution — Senate Democrats are preparing for a test vote on a clean debt ceiling bill. The new proposal could allow Obama to increase the nation’s debt limit unless Congress objected by a two-thirds majority. A test vote on the proposal could occur as soon as October 11. For their plan to work, at least six Republicans need to agree. If it succeeds, this could provide a path out of the debt ceiling stalemate.
Warnambool Cheese & Butter (WCB) — Has received a rival takeover offer from Saputo for an all cash off market takeover offer of $7.00 per share, valuing the company at $392.78 million. This offer trumps Bega Cheese’s (BGA) offer. They are offering $2.00 cash and 1.2 BGA shares (BGA current share price $3.63 x $1.2 = $4.36). WCB board has recommended shareholders accept the offer. Unless BGA come back an increased offer, looks like WCB will fall into the hands of Canadian Saputo.
Local economic news out today — The ANZ job ads and the NAB business confidence survey.
Treasurer Joe Hockey says the US budget and debt ceiling issue could hit home unless it is resolved soon. “It is not having an impact at the moment, but if it drags on it will,” he told the AFR.
NAB says the Aussie dollar is in limbo, tied to US budget issues. At the moment the dollar is high but may not remain at this level for long.
Australia’s $1.6 trillion superannuation system has been ranked as the third best in the world.
FortescueMetalsGroup (FMG) — Has gone to court to prevent Pilbara neighbour Brockman Mining from accessing their railway.
MirabelaNickel (MBN) — Went into a second trading halt in as many months as questions continue about the miner’s solvency. Shares have fallen 80% and are now trading at 1.6c.
Shorters are out in force with the top short positions — MYR (14.5%), COH (14.1%), MND (13.1%) and UGL (12.8%).
PrimeAg’s (PAG) — Shareholders have approved a takeover proposal, a 43c per share offer by Australian Food and Fibre Company.
DiscoveryMetals (DML) — Shareholders will be keeping a watch on Singapore-listed Blumont this week after they went into trading halt on Friday. Blumont is involved in the recapitalisation of DML who owe some $150 million to banks.