Monday Morning Cheat Sheet: 3 Stories Moving Markets
The markets were mixed in Asia overnight. The Nikkei fell 0.94 percent after once again bouncing off a recently-established ceiling just under 11,000. The yen fell slightly to 90.89 per dollar, but is trading just below its 52-week high. Hong Kong’s Hang Seng Index climbed 0.39 percent, while the S&P/ASX 200 climbed 0.52 percent.
European markets were mixed and relatively flat heading into the opening bell in New York on Monday. Germany’s DAX was off about 0.11 percent, while the STOXX 50 was up 0.08 percent, and London’s FTSE 100 edged up 0.03 percent. Brent Crude was up slightly to $113.30 per barrel.
U.S. futures at 8:00 a.m.: DJIA: +0.14%, S&P 500: +0.15%, NASDAQ: +0.20%.
1) With a short-term debt-ceiling solution expected to pass the Senate and find its way to the President’s desk, the sequester has once again taken center stage on Capitol Hill. In the spotlight are nearly $1.2 trillion in automatic spending cuts scheduled over 10 years, and some of the nation’s top policy makers are unsure that a solution can be found before the deadline in March.
“I think the sequester is going to happen,” said Paul Ryan (R-Wis.), chairman of the House budget panel, on NBC‘s “Meet The Press.” The spending cuts would have an enormous impact on domestic and military programs, with tens of thousands of temporary government employees expected to be laid off. Each side of the aisle has wagged their fingers at the other party, and economists think the ongoing tension is producing a measurable effect on business activity…
2) Businesses have cut expansion and hiring plans as a direct result of the ongoing fiscal dysfunction in Washington, a survey conducted by Reuters concludes. A “firm majority” of 76 participating economists believe that America’s burgeoning economic recovery could continue to meander in 2013, as businesses curb growth in the face of uncertainty.
The same survey found that economists were divided on whether or not Congress will agree on a solution to the sequester. While many observers feel that the spending cuts wouldn’t have as severe an impact on the economy as wide-sweeping tax hikes or government default, the sequester would still have a tremendous negative impact on growth.
3) Market participants are looking forward to a battery of economic reports this week. The Federal Open Market Committee is holding a two-day meeting that concludes on Wednesday, when preliminary fourth-quarter GDP results are reported. Job creation figures will be published at the end of the week.
Fourth-quarter GDP is expected to show an annualized rate of 1.2 percent, down from 3.1 percent in the third-quarter. Unemployment is expected to remain at 7.8 percent, with about 155,000 jobs created for the month. Given this trajectory, most economists are predicting that the Federal Reserve will continue its easy-money policy through the year, simultaneously growing its balance sheet and stoking the flames of what many fear could become a currency war.