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Morning Market Update: Markets Defy Shutdown Gloom

International markets arrested their declines overnight amid hopes the US government shutdown will not last as long as initially feared.

The US government entered a shutdown for the first time in 17 years yesterday, but investors held out hopes the budget standoff between Obama and his Republican opponents will be resolved within a week.

Also fuelling the positive vibe was a bigger than expected rise in US manufacturing activity last month – the highest pace of factory expansion since April 2011.

The Dow rose 62 points (+0.4%) to 15192, the S&P500 climbed 13 points (+0.8%) to 1695 and the Nasdaq jumped 47 points (+1.2%) to 3818.

Across the Atlantic, European equities enjoyed outsized gains. Italy led the charge on reports Silvio Berlusconi’s party may rebel against him, allowing the leading party to govern and removing a key source of uncertainty.

The UK FTSE slipped two points, the German DAX put on 1.1% and the French CAC soared 1.3% whilst Italy’s main index leapt 3.1%.

Gold was the big mover in currency markets, plunging 3.1% to US$1286 an ounce – its lowest levels in almost two months.

The yellow metal was battered by a lack of safe haven demand, with investors cautiously optimistic the shutdown may be short-lived.

The Aussie was one of the best performing currencies, rallying back to 94 US cents after the RBA signalled yesterday that the next rate cut may be a while off.

In economic developments, building approvals and the trade balance are both due out at 11:30am, AEST. HIA New Home Sales data is also due for release today.

Morning Market Update: Markets Defy Shutdown Gloom is a post from: Australian Stock Report Market Pulse Blog