Börse & Märkte

Stocks softer but attempting to pare early morning losses

Stocks softer Wednesday but attempting to pare some early morning losses. Gold goes better as do core government bonds and the USD – price-action reflecting the erosion in risk sentiment overnight driven by the upcoming showdown in US Congress over the fiscal situation there. So last week, Fed chief Bernanke’s reluctance to taper QE was based on a number of reasons including the fiscal situation. He kicked up fears in the market about the possible implications of a US government shutdown if the fiscal situation cannot be resolved.

 

Over the next three weeks or so, US lawmakers will be battling it out to find a viable solution to raise the debt ceiling. But, as we have seen time and time again, markets are of the view that lawmakers will find another patch make-shift solution which kicks the can further down the road. Moody’s reassured with comments suggesting that a failure to find a solution and a subsequent government shutdown will not affect the country’s sovereign rating.

 

But markets are too concerned with the question of how much could this impact US economic growth while we witness a fragile recovery in play? If lawmakers fail to drum up a viable plan to raise the debt ceiling, it will be highly likely the Fed will refrain from tapering QE at least until December the earliest. In response to this, we have seen a big demand in US bonds as investors cut risk across the board. Closer to home, its rather subdued on the macro front with contrasting reports from Germany and France – German consumer confidence hits 6-year highs according to GfK while French business confidence drops slightly, leaving the market with little firm direction. Looking ahead, US new home sales and durable goods orders in focus.