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Morning Market Update: Rocky Start Ahead

Global markets suffered further declines on Friday night, with the Dow Jones capping its first weekly drop in four due to Washington’s escalating budget crisis.

There appears to be an unresolvable standoff between President Obama and his Republican opponents, who insist that any budget deal will come only after Obama delays implementation of his health law by a year.

Washington’s budget saga now appears unlikely to be resolved by October 1, the date the US government is likely to be forced into a shutdown.

The budget woes came on top of data showing a smaller than expected rise in US consumer confidence last month and personal incomes in August.

The Dow fell 70 points (-0.5%) to 15258, the Nasdaq shed five points (-0.1%) to 3782 and the S&P500 slipped seven points (-0.4%) to 1692.

The likelihood of a government shutdown has battered sentiment this morning, with most of the major global stock futures gapping lower.

It has been a similar story in commodity markets, with oil taking a dive this morning amid concerns Washington’s budget standoff will hurt US economic growth. Oil closed down 0.6% on Friday night to US$102.87 a barrel.

The risk off environment saw gold enjoy a solid gain of 1.1% to US$1339 an ounce.

Additional support for precious metals came from comments by Fed official, Charles Evans, who suggested any scaling back of monetary stimulus could be pushed out until 2014.

The budget uncertainty and doubts over the likely start date for Fed stimulus tapering saw the US dollar sustain widespread losses against its major counterparts.

In economic news, the Melbourne Institute Inflation Gauge is due for release at 10:30am, AEST and Private Sector Credit is due out at 11:30am, AEST.

Morning Market Update: Rocky Start Ahead is a post from: Australian Stock Report Market Pulse Blog