By Greg Peel
The Dow fell 136 points or 0.9% to be just below 15,000, while the S&P lost 0.9% to 1678 and the Nasdaq dropped 1.2%.
Bridge Street put on an initially enthusiastic response yesterday, kicked on by a welcome services sector reading. The services PMI rose to 47.1 in September, up from 39.0 in August, to its highest level since March. The positive result matches a similarly pleasing manufacturing number on Tuesday, albeit manufacturing actually made it to expansion while services notched up its twentieth month of consecutive contraction. But green shoots, we might say.
Service PMI numbers across the globe were otherwise mixed. Beijing's official Chinese PMI rose to 55.4 from 53.9 to its highest level in six months. The eurozone marked 52.2, up from 50.7, and while the UK result slipped it was only from a soaring 60.5 to 60.3. The US nevertheless disappointed, falling to 54.4 from 58.6 when economists had expected a 57.5 reading.
The US result further dampened the mood on Wall Street as indices sagged once more under the weight of shutdown/debt default uncertainty. President Obama met with Republican leaders on Wednesday night with no result but a ray of hope appeared last night when House Speaker John Boehner indicated he was determined not to take the US into default.
A shutdown is one thing, but were the shutdown stand-off to run up to the debt ceiling deadline on October 17, and another stand-off transpired, the US would be forced to default on its debt. Such an event would be "catastrophic", the US Treasury Department has warned, and likely worse than 2008. Boehner indicated he would go against the unmoveable right wing Republican members and raise a bill allowing a debt ceiling increase, in order to avoid default.
Just when this looked like lifting spirits, news hit the wires of shots fired outside the Capitol building. The incident involved a woman who had earlier attempted to ram the White House gates in her car before being chased through Washington to the Capitol building where a subsequent gunfight with police ended in her demise. She had a baby in the car, who was unhurt. The incident is seen as being non-terrorist related. Wall Street recovered a little ground towards the bell when this became clear.
Interestingly, the government shutdown meant reduced law enforcement numbers around the area.
In other markets, the shutdown is taking its toll. Base metals have been very volatile this week, first falling on shutdown fears then rising on the assumption a resolution would be quickly found, before falling again last night with no end in sight to the impasse. Most metals fell around 1%, with copper down 1.25%. The oils also continued lower, with Brent down US44c to US$108.64/bbl and West Texas down US$1.15 to US$102.95/bbl.
Gold was nevertheless steady at US$1316.00/oz.
The earlier rollercoaster ride for gold appears to be the result of one big order triggering technical selling followed by a sharp recovery the next day. Gold is not attracting safe haven flows during the shutdown, but there is no real reason to sell either. The US dollar index was down a little last night to 79.77 while the Aussie is steady at US$0.9393.
The SPI Overnight closed down 30 points or 0.6%.
Yesterday's positive session on Bridge Street was helped along by strong base metal and gold prices, with the materials sector leading the gains. Gold is steady but the fall in base metals and oil will no doubt dampen spirits today. Spot iron ore is still closed.
Last night Wall Street was expecting factory orders data along with the services PMI. But factory data is provided by the government, and there isn't one. So no release. Tonight should be bringing us the all-important non-farm payrolls number for September but that won't happen either.
The jobs number is critical to that which has been bumped off the financial headlines this week ? the tapering debate. The October Fed meeting is not held until the thirtieth which is well beyond the debt ceiling deadline, so presumably the September jobs number will arrive at some point before then on the assumption the shutdown is resolved.
The shutdown itself must also now factor into Fed thinking. Each day the US government is shut down means points ticking off the December quarter GDP.
HSBC will release its interpretation of the Chinese services PMI today while the Bank of Japan will hold a policy meeting.
This weekend is a long weekend for NSW, the ACT and SA which will mean reduced service from brokers and restricted research flow, although the ASX will be open for business. FNArena will also be open but service will be limited.
Daylight Savings begins on Sunday in the relevant states which means that from Tuesday morning, the NYSE will close at 7am Sydney time.