The market is down seven points. Dow Jones closed down 160 — US stocks fell overnight giving the S&P500 Index its biggest two day loss since June on the back of concerns that the stalemate among US politicians over the debt limit could lead to a government default.

Technology shares led the declines — Facebook fell 6.7%, Yahoo! down 3.5%, TripAdvisor fell 5.5% and Xerox Corp also downl 2.5%. Alcoa Inc rose 1.8% in late trading after reporting better than expected third quarter sales results.

President Barack Obama said the US economy risks a “very deep recession” if lawmakers can’t raise the debt ceiling. Senate Democrats are looking to launch a test vote before the end of this week on a measure that would grant Obama authority to raise the ceiling, unless two-thirds of both chambers of Congress oppose.

Treasury will run out of cash to pay all of its bills at some point between Oct 22-31.

VIX volatility index went up 4.8% to 20.35, its highest close in 2013.

Chain store sales were up 3.3% from a year ago in the latest week according to Redbook and JC Penny shares rose after announcing higher September sales data.

US treasuries fell (yields higher) — Federal Treasury sold $30 billion in 3 year notes on Tuesday. US 10 year yields rose by 1% to 2.64%.

The US dollar fell against major currencies.

The Aussie dollar up from lows of US94.25c to highs of US94.80c before ending at US94.35c. The dollar is currently trading at US94.20.

Base metal prices were again mixed on the LME.

The iron ore price rose by US30c to $US131.70 a tonne.

Spanish 10-year bond were weaker with yields up nine basis points to 4.30%, Portuguese 10-year bond yields were down four basis points to 6.34%.

European shares fell again on Tuesday.

Mining shares fell. RIO down 0.8% and BHP down 1.9%.

Oil prices rose. The softer US dollar underpinned investor interest in oil. Brent crude rose by US48c to US$110.16 a barrel.

Gold fell US50c to US$1324.60 per ounce.

STORIES

  •  Nine days into the US Government shutdown and little progress has been made in raising the debt ceiling. Both Republicans and Democrats are playing hardball, unwilling to budge from their stance. US stocks now starting to feel the pinch, the DOW is down 2.36% since the shutdown took effect. The DOW fell 160 overnight and short-term bond yields have gone up as the failure to raise the debt ceiling takes a deeper toll on financial markets.
  • President Barack Obama is preparing to announce Federal Reserve Vice Chairwoman Janet Yellen to become the new leader. This could be a positive for markets.
  • Fear Index starts to soar — The Chicago Board Options Exchange Volatility Index was up 4.8% to 20.35, its highest close in 2013. The gauge of options prices remains almost 58 percent below its 2011 high, the data show.
  • The IMF has cut their growth forecast for the US economy. China’s 2013 growth forecast was cut to 7.6%, with 2014 GDP growth to come in at 7.3%.
  • Alcoa — Posted earnings of 11c a share, on sales of $5.77bn which was higher than an expected 5c a share on sales of $5.63 billion. The company reaffirmed its 2013 global aluminum demand growth forecast of 7%.
  • Yum Brands — Owner of KFC and Pizza Hut posted earnings of 85c a share, on revenue of $3.47 billion, which was weaker than an expected 93c a share on sales of $3.53 billion. They expect financial year earnings to fall from a high-single digits to a low double-digits.
  • Business confidence is at a three-and-a-half-year high thanks to the election of the Coalition government.
  • Monadelphous (MND) — Has won contracts for work on two projects and extended a current contract in deals worth $250 million.
  • Qantas Airways (QAN) — After a five-year delay the Dreamliner has left the Boeing factory in Seattle bound for Australia.
  • Sims Metal Management (SGM) — Has appointed former US-based Harsco Corporation executive Galdino Claro as their new CEO.
  • OceanaGold Corp (OCG) — Has agreed to acquire all the shares in Canadian Pacific Rim Mining Corp.
  • iSelect (ISU) — ACCC has demanded the company withdraw or modify a “potentially misleading” announcement that insisted the company would reach their earnings forecasts.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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