The momentum seen last week in Asian markets was missing in today’s trading, as investors tried to assess the impact of the US shutdown. Asian markets exhibited a mixed sentiment, while S&P 500 futures were downwards. However, analysts opine that the effect should be limited as the rally has been driven by ‘broadening economic growth and profit expansion’. Also, the fiscal debt ceiling which is more relevant to equity markets, is not in the picture this time around.
The Yen and USD have both strengthened over the weekend. The USD has been driven by anticipation of possible hawkish remarks from the Fed. The US yields also exhibited a similar upward move, as near term inflation expectations are significantly higher.
While the Euro had gained on SDP’s willingness to create an alliance in Germany, thereby securing Merkel her fourth term, bringing to an end uncertainty of months, it pared its gains later on. Chinese yuan rose today on solid economic data, and is now trading at the significant 6.4 level against the USD.
While yields across Europe were driving by the news of ECB planning to end its asset purchase program in September, recent reports that it may not, have led to a decline in Bund yields. The central bank decisions later this week will provide clarity on the situation.
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