US shuts down, markets yawn

US shuts down, markets yawn

By Michael McCarthy (chief market strategist, CMC Markets)

The failure of the US Congress to pass spending bills could see government operations suspended this week. However markets are paying scant attention, seeing this largely as political brinksmanship with little economic impact. Gains for shares are expected across the Asia Pacific region today as bonds continue their sell off, industrial commodities stabilise at higher levels, and the record run in US equities grinds higher.

A lack of macro data this week means meetings of the ECB and BoJ are the focus for globe. Neither are expected to shift interest rate settings but expectations are rising that the ECB will flag a September end to its current bond purchasing program. Investors may instead zero in on company reporting. 85 of the top 500 US companies will showcase quarterly earnings this week. The Australian semi-annual reporting season doesn’t get into swing until next week.

A positive outlook for financial stocks and rallies in iron ore and gold should mean a positive start to the week for Australian shares. Militating against this constructive outlook is a stronger Australian dollar and the underperformance that has dogged the Australia 200 Index in 2018. Futures are pointing to a half percent gain in the session. If the close once again falls below this opening strength the risks of a locally driven market tumble will remain higher.

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