The US government shutdown is likely to weigh on the markets here too. But will it overshadow the macro indicators that have come out to be well above expectations? Possibly not. One could see a flat open but a trading day which will biased positively to some extent. But the caveat remains – the haze is yet to clear, tread cautiously.
For a market battered by a slew of bad economic vibes some respite seems to be in place today. News on the external economy front seems to be a little encouraging than what was thought it could be. The impact of restrictions placed on import of gold combined with a seemingly good performance of the core sector should bring in much needed respite for the markets today. But having said that, there is still something to worry; government finances. The government has reportedly exhausted 75% of its fiscal limit for the entire year as at the end of August and this could mean a squeeze on government spending if the fiscal targets are to be adhered to.
But before you start preparing for the day based on what macro factors on the domestic front are indicating, lets really face up to the fact that developments in key global markets are not really supportive of a change in sentiment. The US is once again facing the same crisis it did in 2011. The deal to fund operations for the next budget year which begins on October 1 is nowhere in sight. This could see the government shut down leaving some essential functions like national security intact, but impacting many other functions and furloughing millions of workers.
Simply put, the US government is divided over some key provisions, especially over the compulsory insurance clause (read ‘Obamacare’) which is likely to put additional pressures on the fiscal condition of its citizens. Where does all this lead to? Until lawmakers do not mend their differences and agree on a common agenda for the US economy, matters could come to a complete standstill.
So how are others looking at the matter? While in the US, stocks cranked under the pressure of the impasse, ending the day at miserably lower levels, earlier in the day, European markets were found trending lower following the same fears. To add to all this mayhem on funding and shutting comes the political instability in Italy. Amid allegations of tax frauds threats of resignations, the Italian government is facing a fresh crisis. This factor is adding to the strain of an already volatile market sentiment.
Near to home, Asian markets are trading mixed with Hong Kong and Malaysia on the losing end. Japan is trading up half a percent while an improvement in the Chinese manufacturing PMI rising up has added to some buoyancy to the markets there. The Shanghai Composite is currently trading up by more than half a percent. Singapore, Korea and Taiwan too are trading in a fairly positive zone in early morning trades.
Will the Indian market follow its Asian peers? The kind of volatility that we have been witnessing over the past week or so, and, the weak opening that we had to the week yesterday, it could well be a cautious start to the day today. The US government shutdown is likely to weigh on the markets here too. But will it overshadow the macro indicators that have come out to be well above expectations? Possibly not. One could see a flat open but a trading day which will biased positively to some extent. But the caveat remains – the haze is yet to clear, tread cautiously.
