Tuesday Morning Cheat Sheet: 3 Stories Moving Markets

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Major markets were mixed in Asia following news that the United States failed to pass a continuing resolution on Monday, and investors around the world are trying to figure out how long a partial government shutdown could last and how much damage it could cause. In Japan, the Nikkei climbed 0.2 percent to to 14,484.70 despite the shutdown and underwhelming domestic economic reports. The yen strengthened slightly to 97.825 against the dollar. In Hong Kong, the Hang Seng fell 1.5 percent to 22,859.86, and in Shanghai, the Composite gained 0.68 percent to 2,174.66. In India, the Mumbai Sensex gained 0.71 percent to 19,517.15. In Australia, the ASX All Ordinaries fell 0.22 percent to 5,206.30.

European markets mostly edged higher toward the close of their trading day. In the U.K., the FTSE 100 was off 0.36 percent; in Germany, the DAX was up 0.38 percent; in France, the CAC 40 was up 0.71 percent; and the Euronext 100 index was up 0.31 percent. The euro strengthened slightly to 0.7377 against the dollar.

U.S. equities, which closed down on Monday, edged higher in early trading on Tuesday despite the shutdown. At about 10 a.m., the Dow Jones Industrial Average was up 0.05 percent, the S&P 500 was up 0.33 percent, and the Nasdaq was up 0.38 percent.

Here are three stories to keep an eye on.

elections republicans democrats

Source: http://www.flickr.com/photos/kristinausk/

1. Government Shutdown

Nobody wanted it, but here we are anyway. As many feared and expected, policymakers failed to pass a continuing resolution on Monday night, and the U.S. government has begun the process of idling 800,000 workers and placing nonessential operations into hibernation until further notice. The White House has placed the mantle of responsibility on the shoulders of the GOP, which controls the House of Representatives, while Republican Party has in turn placed blame on the Obama administration and the Democratic Party, which controls the Senate.

The full scope of the damage the shutdown will cause is hard to quantify and depends largely on how long the shutdown lasts. The White House suggests that a one-week shutdown could cost the economy as much as $10 billion, and that 800,000 federal workers will be furloughed for the duration of the standoff… (Read more.)

2. Japanese Economy

The headline unemployment rate in Japan increased from 3.8 percent in July to 4.1 percent in August, according to the nation’s statistics bureau. Analysts were expecting unemployment to remain flat. Household spending in Japan also decreased unexpectedly, falling 1.6 percent on the year compared to expectations for an increase of 0.2 percent.

At the end of August, Yoshihisa Morimoto, a member of the Policy Board at the Bank of Japan, suggested in a speech that “Japan’s economy was relatively weak in the second half of 2012 as exports and production decreased mainly reflecting the deceleration in overseas economies, which in turn adversely affected domestic demand such as business fixed investment in the manufacturing sector. Economic conditions, however, have become favorable since the beginning of 2013. Recently, domestic demand, in particular public investment and private consumption, has been firm, exports have been picking up in a situation where overseas economies are gradually heading toward a pick-up, and industrial production is increasing moderately.”

Japan Consumption

Source: Ministry of Internal Affairs and Communications

3. European Unemployment

Unemployment remained stable across the euro area at 12 percent and across the EU28 at 10.9 percent in August, according to Eurostat. While both rates are still up on the year — from 11.5 percent and 10.6 percent, respectively — slow to no growth in the number of unemployed people is a positive sign for the struggling region.

However, as has been the case throughout most of the recovery, the headline unemployment rate masks vast differences in the employment situation in various countries. Unemployment increased dramatically in Cyprus (from 12.3 percent to 16.9 percent) and Greece (24.6 percent to 27.9 percent), and decreased dramatically in Latvia (15.6 percent to 11.4 percent) and Estonia (10.1 percent to 7.9 percent).

EU Unemployment

Source: Eurostat

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