Talks between House Republican leaders and the White House broke down on Saturday, leaving the Senate to try to forge ahead to end the government funding and debt stalemate. With the current instability in the US, investors are looking for a safe haven, the 5 year Standard Bank Capital Accumulator is an attractive investment with a 47% return if the market remains flat or higher, the SWS Accelerator and SWS Lighthouse, also offer an attractive investment strategy.
Senate leaders met Sunday and it was claimed that the talks were fruitful. Both houses will be in session today even though it is a public holiday in the US. Time is clearly running out though, with any deal in the Senate requiring the support of the House—and the President. The deadlock has not weighed on Asian markets too significantly, perhaps due to the fact that traders anticipate a quiet session given the US holiday today.
Data from China showed a surprisingly strong rise in annual CPI inflation to 3.1% from 2.6% last time. It was expected to rise in September, but only to 2.8%. There were some unhelpful base effects this month but the monthly rise of 0.8% was steep and partly reflected drought and flooding in some parts of the country. Inflation is now at a 7-month high, albeit still below the 2013 target of 3.5%. PPI prices, released at the same time, fell 1.3% against calls for a fall of 1.4% after –1.6% last time. The data is not going to have a significant bearing but will probably reinforce the idea that the scope for monetary easing from the PBOC is pretty limited.
Euro zone industrial production is seen rising 0.8% in August, as part of a recovery from the 1.5% slump in July. We think the risks are skewed to the low side. What’s more, even if production gains 0.8% it would still mean a decline in the annual rate, to –2.5% from –2.1% in July. Indeed, the story of production to date is that its catch-up to improving business confidence has been very slow indeed..
Fed Chairman Bernanke speaks overnight, but it is on the subject of “celebrating 20 years of Mexican central bank independence.” It’s hardly a subject that’s going to make markets move. But there’s also a deeper issue here and that’s whether Bernanke tries to slowly take a step back from policy comments, mindful of the fact that a new Fed Chair (Yellen) is likely to be confirmed soon. Our view is that the Fed’s judgement of the performance of the economy will be the key factor. If there’s a quick restoration of order, following the recent strains on Capitol Hill, Bernanke might still be the one to launch tapering. If order is not restored soon the Fed may have little option but to wait for Yellen to take over. At the moment we lean to the latter view but, as we saw with the September debacle over tapering, it’s impossible to feel confident about these things.
The global data diary is thin this week, in the US we have non- farm payrolls on Tuesday, Jobless Claims and CPI data out on Thursday. On Tuesday we have the UK CPI data release and Jobless claims on Wednesday.
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*Article courtesy of Standard Bank CIB
