Construction looking optimistic as US stays stalled

Australia:

The AiG performance of construction index rose from 43.7 to 47.6 in September, the highest reading since 2010.

The improvement corresponds to a recovery construction, although the index remains below 50, indicating contraction.

The rise in the sub-indices in new orders and activity provide a positive sign of further recovery.

Share Markets:

Sentiment weakened as the deadlock within US Congress to raise the debt ceiling continued.

While the partial government shutdown doesn't appear likely to end anytime soon, the greater concern for markets is the need to raise the debt ceiling.

European stocks fell, while in the US, the Dow and S&P500 both dropped 0.9%.

Bonds: 

US treasuries rose (yields fell) as the stalemate in the US continued. The ongoing shutdown is raising concerns about the outlook for growth.

Treasuries have also been supported by safe-haven demand and the growing prospect the Fed will delay reducing its bond purchase program.

Foreign Exchange: 

The US dollar was weighed down by the deadlock in US Congress. The dollar index fell to an eight-month low, while the yen and Swiss franc benefited from risk aversion.

The Australian dollar held around 94.3 US cents as weaker risk appetite offset a weaker US dollar.  

Commodities: 

Commodity prices were mixed, although the broad CRB index gained overnight. Gold prices were supported by the weaker US dollar and ongoing budget impasse.

However, the concerns that the events in the US would weigh on growth saw other commodity prices weaken. Oil and copper prices both fell.  

Europe: 

Euro zone GDP growth was confirmed at 0.3% in Q2, but minor back revisions saw the annual growth rate in Q2 shaved back from -0.5% to -0.6% yr.

Data this week on German factory orders, exports and industrial production will assist in determining how much of Q2's growth was sustained in Q3.

Sentix investor confidence slipped from 6.5 to 6.1 in October, the second highest reading in almost two and a half years.

This modest slippage was led by the expectations component, while current conditions improved only slightly (0.3 pts) following five months of sharp gains (from -3.5 in April to -8.8 in September).

United States: 

There continues to be little sign that the impasse regarding the debt ceiling and budget will lift anytime soon.

House Speaker Boehner has said that there aren't enough votes in the House "to pass a clean debt limit" (ie. without Obamacare cuts attached), contradicting other reports that enough moderate Republicans might cross the floor to vote with the Democrats for a clean bill. 

Consumer credit rose from a revised US$10.4bn to US$13.6bn in August.


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