Treasury secretary warns US shutdown, debt showdown 'can never happen again'

WASHINGTON - The recent US government shutdown and debt limit showdown bruised the nation's economy and "can never happen again," Treasury Secretary Jack Lew said in an interview that aired Sunday.

"We took an economy that is fighting hard to get good economic growth going, to create jobs for the American people, and took it in the wrong direction," Lew said on NBC's "Meet the Press" program.

He said borrowing costs went up and economic activity suffered after more than two weeks of a partial government shutdown, as the country came within hours of reaching its legal borrowing limit and defaulting on its debts.

"This one was a little bit scary, because it got so close to the edge," Lew said.

"We need to make sure that the government does not go through another round of brinksmanship. This can never happen again."

The treasury secretary said he was "confident our economy can recover," from the damage done by the budget stalemate.

But he said the economy is hindered by "deep spending cuts that are part of sequestration" --arbitrary, across-the-board spending cuts which came into force in March and will take another cut from the federal budget in January.

This looks to be the next big budget battle, which only earned a temporary reprieve with the deal that ended the showdown last week.

The compromise plan hashed out in the Senate and passed by the House only funds government until January 15 and extends US borrowing authority until February 7.

President Barack Obama has already begun arguing for a roll back of the "sequester" cuts, an argument Lew reiterated Sunday.

"The president has made clear that we think you should replace some of the sequestration cuts with sensible balance, entitlement, and tax reforms that put us in the right direction for the future," he said.

source: interaksyon.com

Asian shares cheer as deal to avert U.S. default reached

SYDNEY - Share markets from Australia to Japan staged a relief rally on Thursday after legislators produced a last-minute deal to lift the U.S. government's borrowing limit and dodge a potentially catastrophic debt default.

The agreement, crafted by U.S. Senate leaders, has been approved by Congress, leaving President Barack Obama to sign the bill into law. Obama has vowed to do so promptly and begin reopening the government "immediately.

It came just hours ahead of an October 17 deadline when the Treasury Department said it would have exhausted its borrowing authority.

MSCI's broadest index of Asia-Pacific shares outside Japan hit a fresh five-month high and was last up 0.4 percent. Tokyo's Nikkei advanced 1.2 percent to its highest in three weeks.

But in what appeared to be a buy-on-the-rumor/sell-on-the-fact move, U.S. stock index futures actually dipped on the news, having already rallied 1.3 percent overnight on hopes that a breakthrough was imminent.

The dollar index, which tracks the greenback's performance against a currency basket, also slipped a touch to 80.381, pulling back from a one-month high of 80.745.

The deal, however, does not resolve the fundamental issues of spending and deficits that divide Republicans and Democrats. It funds the government until January 15 and raises the debt limit through to February 7, so global markets face the possibility of another showdown in Washington early next year.

"The can has been kicked further down the road...the reset button has been pushed and we will go thought this all again in two months time," said Evan Lucas, market strategist at IG in Melbourne.

But Lucas expected "normal trading" to return over the coming days as the earnings season gets underway.

Still, the resolution couldn't have come at a better time for companies such as South Korean train maker Hyundai Rotem, which recently launched an initial public offering in what could be the country's biggest share sale so far this year.

Crisis over?

In the currency market, the improved risk appetite saw investors favor high-yielding currencies including the Australian dollar.

The Aussie dollar hit a 4-month high of $0.9574 and scaled a 4-1/2 month peak of 94.48 yen. It has since stepped back a notch to $0.9534 and 94.01 yen.

Against the yen, the U.S. dollar briefly reached a three-week high of 99.01, before strong selling interest knocked it back to 98.64. The euro edged up 0.1 percent to $1.3549.

Among commodities, copper slipped 0.5 percent to $7,227 a tonne (1 tonne = 1.12 metric tons), while gold traded at $1,280 an ounce -- struggling to gain momentum in the absence of safety bids. U.S. crude dithered at $102 a barrel.

Many traders are already trying to get past the fiscal drama and looking to see when a backlog of U.S. economic data, including the September payrolls, will be released when the partial government shutdown is lifted.

With the maneuvering in Washington just about over, investors will re-focus on economic news and the timeline for the U.S. Federal Reserve's tapering of its bond-buying program -- a major driver of global assets in recent months.

The Fed stunned markets last month by opting to delay the start of stimulus reduction.

"It will be some time before we are able to get a clear read on the U.S. labor market post-shutdown," said Westpac economist Elliot Clarke.

"But a logical expectation given recent events and the lack of a long-term solution is that we will see soft employment growth through the remainder of 2013 and into 2014."

That, Clarke said, is likely to see the Fed maintain a dovish tilt, adding the U.S. central bank will very likely have to downgrade its 2013 and 2014 growth forecasts given the impact of the U.S. government shutdown.

source: interaksyon.com

Obama signs bill ending US govt shutdown

President Barack Obama early on Thursday signed legislation that ends a US government shutdown and raises the debt ceiling, the White House said.

Congress late Wednesday approved an 11th-hour deal to end a partial government shutdown and pull the world's biggest economy back from the brink of a historic debt default that could have threatened financial calamity.

Capping weeks of political brinkmanship that had unnerved global markets, the Senate and House of Representatives each passed the spending measure after Republicans dropped efforts to link the legislation to changes in President Barack Obama's signature healthcare law.

The deal, however, offers only a temporary fix and does not resolve the fundamental issues of spending and deficits that divide Republicans and Democrats. It funds the government until January 15 and raises the debt ceiling until February 7, so Americans face the possibility of another government shutdown early next year.

With the deadlock broken just a day before the US Treasury said it would exhaust its ability to borrow new funds, US stocks surged on Wednesday, nearing an all-time high. Share markets in Asia also cheered in early Thursday trade.

Taking the podium in the White House briefing room after the Senate vote and just before the House took up the measure Obama said that with final congressional passage, "We can begin to lift this cloud of uncertainty and unease from our businesses and from the American people."

"Hopefully next time it won't be in the 11th hour," Obama said. "We've got to get out of the habit of governing by crisis."

The standoff between Republicans and the White House over funding the government forced the temporary lay-off of hundreds of thousands of federal workers from October 1 and created concern that crisis-driven politics was the "new normal" in Washington.

Senator John McCain, whose fellow Republicans triggered the crisis with demands that the Democratic president's "Obamacare" healthcare reform law be defunded, said earlier on Wednesday the deal marked the "end of an agonizing odyssey" for Americans.

"It is one of the most shameful chapters I have seen in the years I've spent in the Senate," said McCain, who had warned Republicans not to link their demands for Obamacare changes to the debt limit or government spending bill. Polls showed Republicans took a hit in public opinion over the standoff.

The Democratic-led Senate overwhelmingly passed the measure on a 81-18 vote, and the Republican-controlled House followed suit 285 to 144, clearing the way for Obama to sign it into law no later than Thursday, when the Treasury says it will hit the $16.7 trillion debt ceiling.

Fully reopening the government was expected to take several days. While essential functions like defense and air traffic control have continued, national parks and agencies like the Environmental Protection Agency have been largely closed.

source: interaksyon.com

Wall Street Week Ahead: Debt-ceiling battle may overshadow earnings

NEW YORK - U.S. stock investors, hoping to leave politics aside to focus on fundamentals, aren't going to get their wish yet as lawmakers battle over raising the debt ceiling.



Proof that political uncertainty was holding down markets was seen on Thursday and Friday as the S&P 500 generated two days of strong gains in advance of the weekend.







Legislators will be busy negotiating raising the $16.7 trillion federal borrowing limit and reopening the federal government. If the borrowing cap is not increased by October 17, it could lead to a U.S. debt default.



The government has been partially shuttered since October 1. The shutdown has lasted longer than many expected, and while proposals from both President Barack Obama and congressional Republicans have been viewed as signs of progress, a final agreement remains elusive.



When not worrying about the government shutdown, investors will dive into the first busy week of third-quarter results, led by bellwethers General Electric Co, Goldman Sachs Group Inc, and Google Inc.



"If we see a deal over the weekend, the market will trade back to where it was before all this concern settled in, near all-time highs," said David Joy, chief market strategist at Ameriprise Financial in Boston. "Otherwise we'll probably fall back to 1,650, possibly further, depending on how rancorous the disagreement is."



Increase in volatility



The S&P 500 is above its major moving averages, which could serve as support in the case of a market decline. The benchmark index is 0.9 percent above its 50-day moving average of 1,678.22, and 1.8 percent above its 100-day average of 1,662.53.



Many analysts have forecast increased volatility the longer the market goes without a deal. The CBOE Volatility index spiked this week above 20 for the first time since June. Trading in VIX futures suggested more concern about the near-term market trend as well.



Data showed investors were willing to pay more for protection against a slide in the S&P 500 now than three months down the road. On Wednesday, the spread between the VIX and 3-month VIX futures briefly hit its lowest since late 2011 at around negative 2.



That condition reversed on Thursday when the market rallied sharply, but traders remain on guard against another jolt of volatility if Washington politicians emerge from the weekend without any progress.



The indexes' weekly performance was mixed. Late in the session on Friday, the Dow Jones industrial average rose 0.5 percent, the S&P added 0.2 percent and the Nasdaq fell 1.1 percent, pressured by selling in some of its best performers this year, including Netflix and Tesla Motors Inc.



While most analysts said a default on U.S. debt would be catastrophic for the economy, they also said it was highly unlikely that a deal would not be reached.



Ken Fisher, who oversees $49 billion at the Woodside, California-based Fisher Investments Inc, said there was a "maybe 0.0001 percent chance" the debt ceiling would be breached.



"People have been saying that things are different this time, but Washington is just a distraction for markets, simple as that," Fisher said. "If a default was possible, you would see bond prices fall through the floor. Eventually you have to stop listening to the people crying wolf."



Notably, investors in the short-term Treasury bill market are preparing in case of a missed or delayed payment. Yields on bonds maturing from late October through the end of 2013 are at elevated levels as investors shun those issues as a result of the default threat.



Earnings heat up



Next week is a busy one for corporate earnings. Results and outlooks from banks may be the most important, as investors look for companies' comments on how the shutdown may affect growth and the impact of higher interest rates. Among the early indications, Wells Fargo said revenue from home refinancings fell to its lowest level since the second quarter of 2011.



"The shutdown will impact earnings growth some, but I expect the negative effect will likely be small," said Fisher. "We're clearly still in the middle phases of a bull market."



S&P 500 companies are expected to post earnings growth of 4.2 percent in the quarter, down from the 8.5 percent rate that had been forecast on July 1, according to Thomson Reuters data. Of the 31 S&P components that have reported thus far, about 55 percent have topped expectations, below the historical average of 63 percent.



While some government-prepared economic data will be delayed next week because of the shutdown, including consumer prices and housing starts, those still scheduled include the New York Fed manufacturing survey and Philadelphia Fed survey, both for October.



Monday is Columbus Day and a federal holiday. Stock markets will be open but the U.S. government, of course, will remain shut.

source: interaksyon.com

US shutdown drives consumer sentiment to nine-month low

NEW YORK - U.S. consumer sentiment deteriorated in October to its weakest in nine months as the first federal government shutdown in 17 years undermined Americans' outlook on the economy, a survey released on Friday showed.



The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment fell to 75.2 in October, down from 77.5 in September. This was the lowest figure since January.



The early October reading fell short of the 76.0 forecast by economists recently polled by Reuters.



Prolonging the budget impasse that caused the government shutdown, which has kept hundreds of thousands of federal employees and contractors out of work, would exact a toll on consumer spending and the overall economy.



"The timing of the fiscal debacle is very bad for retailers going into the year-end holiday season," said Yelena Shulyatyeva, U.S. economist at BNP Paribas in New York.



Economists had forecast a government shutdown would subtract at least 0.1 percentage point a week from the gross domestic product. They said the damage would intensify if the shutdown lasts more than two weeks.



While the sentiment gauge declined for a third straight month, the size of the decrease was relatively small, as worries about a protracted shutdown were mitigated by some optimism about income and inflation, survey director Richard Curtin said.



"Consumer confidence posted a surprisingly small decline in early October despite widespread awareness of the government shutdown," Curtin said in a statement.



"The muted response may be due to consumers giving progressively less credence to the economic scare tactics that have framed the debates over the past few years," he said.



The survey showed a modest pickup in household plans to buy cars and homes.



Financial markets brushed off the latest sentiment data. Wall Street stocks and the dollar clung to earlier gains, while bond yields were slightly lower.



Possible further weakness



"To be sure, this can quickly change if the impasse continues," Curtin said of a possible further deterioration in consumer sentiment.



There were few signs that President Barack Obama and top Republican lawmakers were close to an agreement to reopen the government and to increase the $16.7 trillion debt ceiling, which is expected to be exhausted on October 17.



Traders fear a failure to raise the debt ceiling would cause the U.S. government to default on its debt, wreaking havoc on financial markets and sending the global economy into tailspin. Most of them still are clinging to the hope of a last-minute deal before next week in a bid to avert a default.



For now, the negative developments in Washington have hurt consumers' outlook rather than their current assessment on the economy and their own finances.



The survey's gauge of consumer expectations fell to 63.9, the lowest level so far this year. This compared with 67.8 in September and a forecast of 67.5.



"We could see further deterioration in the second half of the month," BNP's Shulyatyeva said.



The measure on consumers' 12-month economic outlook fell to 71 in early October, the weakest level since December 2011. It fell 15 points from September, which was the biggest one-month drop since December amid anxiety about "fiscal cliff."



However, the index of current conditions edged up to 92.8 from 92.6 last month. Analysts had projected a reading of 91.0.



The resilience in this measure signaled some optimism about rising income. "When asked about their prospects for household income gains during the year ahead, the median expected increase was the highest in five years," Curtin said.



Consumers' view on inflation eased from September following the Federal Reserve's decision to refrain from paring its $85 billion monthly bond purchases to support the economy recovery. Mortgage rates and other consumer borrowing costs fell from a month earlier.



The one-year inflation expectation fell to 2.9 percent from 3.3 percent, while the five-to-10-year inflation outlook slipped to 2.8 percent from 3.0 percent.

source: interaksyon.com

Republicans unveil plan to avert US debt default, probably end standoff

WASHINGTON - Republicans in the House of Representatives on Thursday unveiled a plan that would avert a looming US default, in a sign that lawmakers may end a standoff that has rattled financial markets and thrown America's future creditworthiness into question.

Ahead of a meeting with President Barack Obama, it was unclear whether Republicans would be willing to end a government shutdown that took effect on October 1 without concessions that would undermine Obama's signature healthcare law, a stance that precipitated the crisis.

Still, the offer to raise the debt ceiling is a significant shift for Republicans, who had hoped to extract concessions on spending and health care. By extending the government's borrowing authority until possibly the middle or end of November, it would eliminate the near-term threat of a default that would hit everyone from retirees to bondholders.

"It's time for these negotiations and this conversation to begin," House Speaker John Boehner told reporters after presenting the plan to his fellow Republicans.

Obama has already said he is willing to consider a short-term debt ceiling increase as long as it is not tied to other concessions. Obama will take a look at the proposal, a White House official said. But the White House insisted that Republicans also must agree to end a government shutdown that took effect on October 1.

Many rank-and-file Republicans also appeared to be skeptical of the deal when Boehner presented it at a closed-door meeting on Thursday morning, aides said. Boehner's grip over his troops has been tenuous this year and many of the chamber's most conservative lawmakers have defied him repeatedly on other crucial votes.

Still, investors seemed to be heartened by the development. US stocks rallied strongly with major indexes climbing more than 1 percent.

The Treasury Department says it will be unable to pay all of its bills if Congress does not raise the $16.7 trillion debt ceiling by October 17. Republicans say the Obama administration would be able to keep up with its bond payments at the expense of other obligations if that deadline was missed. Treasury Secretary Jack Lew said that's not possible.

"It would be chaos," he told the Senate Finance Committee.

The Republican plan would postpone that day of reckoning by six weeks, which would give them more time to seek spending cuts, a repeal of a medical-device tax, or other measures they say are needed to keep the national debt at a manageable level.

Democrats have called for a debt-ceiling hike that would extend government borrowing authority for more than a year.

The House could vote on the measures as early as Thursday afternoon, though timing remained unclear. House leaders canceled a planned recess and said they would remain in Washington next week to keep working on the problem.

With the October 17 deadline a week away, Obama is scheduled to meet with House Republican leaders on Thursday afternoon. He is also due to meet separately with Senate Democrats and Senate Republicans.

The plan would do nothing to resolve Republican objections to Obama's healthcare reform bill, known as the Affordable Care Act, which prompted the October 1 shutdown.

Hundreds of thousands of federal employees have been out of work since then and individual businesses, from arms makers to motels, have begun to lay off workers as well.

The Labor Department said on Thursday that 15,000 private-sector workers have filed for unemployment benefits due to the shutdown.

House Republicans have passed bills that would reopen portions of the government and otherwise ease the pain of the shutdown, but they still hope to tie a full restoration of government funding to conditions that would undercut "Obamacare," as it is popularly known. (Additional reporting by Jason Lange, Thomas Ferraro, Steve Holland and Roberta Rampton)

source: interaksyon.com

Dow, S&P 500 end modestly higher on hopeful signs in fiscal impasse

NEW YORK - The Dow and S&P 500 rose on Wednesday as Republicans and Democrats in Congress showed early signs of a possible break in the impasse, and U.S. President Barack Obama invited both sides for talks about ending the government shutdown, now in its ninth day.



Wall Street rebounded in the afternoon after the Nasdaq fell as much as 1 percent, with defensive sectors such as telecommunications and utilities rising on the day.



The Nasdaq, however, closed lower for a third day, pressured as investors sold this year's winning tech stocks including Netflix Inc and Fastenal Co.



"With the uncertainty over the government shutdown and the shaving away of the GDP each day, unfortunately, some investors will start selling these things that were good for the year rather than pulling off the laggards. And tech has been performing very highly," said Michael Matousek, head trader at U.S. Global Investors in San Antonio, Texas.



In the latest Washington developments, Republicans and Democrats floated the possibility of a short-term increase in the debt limit to allow time for broader negotiations on the budget.



At the same time, Obama began inviting lawmakers from both parties to the White House for meetings to discuss the government shutdown and raising the debt limit.



The slight shift in tone was aided by a column by House Budget Committee Chairman Paul Ryan of Wisconsin, who urged a negotiated end to the stalemate but did not mention Republican demands for linking changes in the federal healthcare law with government funding.



The market was also relieved that Obama nominated Federal Reserve Vice Chairwoman Janet Yellen to run the world's most influential central bank, providing some relief to markets that would expect her to tread carefully in winding down economic stimulus.



Yellen, an advocate for aggressive action to stimulate U.S. economic growth through low interest rates and large-scale bond purchases, would succeed Fed chairman Ben Bernanke, whose second term ends on January 31.



The Dow Jones industrial average ended up 26.45 points, or 0.18 percent, at 14,802.98. The Standard & Poor's 500 Index rose 0.95 point, or 0.06 percent, at 1,656.40. The Nasdaq Composite Index was down 17.06 points, or 0.46 percent, at 3,677.78.



The CBOE Volatility Index, a measure of investor anxiety, continued to rise, hitting 21.34, before retreating to 19.60. A level above 20 is generally associated with increasing concern about the near-term direction of the market.



A poll by Reuters showed Wall Street strategists expect the market to rebound toward the end of the year.



The S&P 500 dropped 1.2 percent on Tuesday, its worst decline since August 27, sending the benchmark index to its lowest level since September 6 as traders cashed in gains in some of the year's highest performing tech stocks.



The Federal Reserve's shock decision last month not to reduce its support for the U.S. economy was a "relatively close call" for policymakers, according to minutes of the meeting that also suggested there was still broad support to trim bond-buying this year. Since last month's meeting, the outlook for scaling back bond purchases has grown cloudier.



"Between slow growth and the shutdown, it's clear we're in troubled times. I wouldn't expect any tapering for quarters from now," said Todd Schoenberger, managing partner at LandColt Capital in New York.



In company news, Darden Restaurants Inc shares jumped 7.1 percent to $49.57 after the Wall Street Journal, reported hedge fund Barington Capital LP had taken a 2.8 percent stake in the owner of the Olive Garden and Red Lobster restaurants.



Shares of Hewlett-Packard Co rallied nearly 9 percent to $22.60 after Chief Executive Meg Whitman said she expects revenue to stabilize in 2014 with "pockets of growth" before the business accelerates again in 2015.



Yum! Brands Inc fell 6.8 percent to $66.48 after the KFC parent warned it will take longer than expected for restaurant sales to rebound in China, which accounts for more than half the company's overall operating profit.



Volume was light, with about 5.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.1 billion shares.

source: interaksyon.com

Obama admits cancelled Asian trip hurt US credibility, boosted China

WASHINGTON -- President Barack Obama said on Tuesday that China had probably taken advantage of his absence from a summit in Asia this week and he warned that the government shutdown and fiscal debate were hurting US credibility abroad.

Obama last week canceled a trip to Indonesia and Brunei, opting to stay home and manage the US government shutdown instead of joining other world leaders at international summits being held there.




A week after the shutdown started, Republicans and Democrats are still at an impasse over how to reopen the government and raise the US debt ceiling before an October 17 deadline.

At a news conference on Tuesday, Obama said he should have been able to make the trip to help advance a trade agreement and present a counterweight to China.

"I'm sure the Chinese don't mind that I'm not there right now," he said. "There are areas where we have differences and they can present their point of view and not get as much push back as if I were there."

Obama's cancellation of the trip, which was also to include stops in Malaysia and the Philippines, has raised doubts about his administration's vaunted pivot to Asia, which was aimed at reinvigoration US military and economic influence in the region while balancing a rising Beijing.

Secretary of State John Kerry attended in Obama's place.

Chinese President Xi Jin ping was in Indonesia announcing a raft of trade deals worth $30 billion when US officials announced Obama would be a no-show.

Obama had hoped to advance talks for a trade pact known as the Trans-Pacific Partnership, or TOP, during the Asia trip. Talks over the pact involve 12 nations and aim to establish a free-trade bloc that would stretch from Vietnam to Chile to Japan.

The United States expressed hope on Tuesday it could seal the pact by the end of the year despite resistance from some countries and Obama's absence from the regional summit.

"It didn't help that I wasn't there to make sure that we went ahead and closed a trade deal that would open up markets and create jobs for the United States, and make sure that countries were trading fairly with us in the most dynamic, fastest-growing market in the world," Obama said at the White House. "I should have been there."

'Not showing up to my own party'

Obama attends summits around the world every year, and US officials prepare for them for weeks. The president's emphasis on attending regional summits in Asia was designed to put muscle behind his promise the United States would remain a Pacific power.

"The irony is our teams probably do more to organize a lot of these multilateral forums and set the agenda than anybody. I mean, we end up being engaged much more than China, for example, in setting the agenda and moving this stuff forward," Obama said.

"It's almost like me ... not showing up to my own party. I think it creates a sense of concern on the part of other leaders."

Since 2011, China has consolidated its position as the largest trade partner with most Asian countries.

It is also the top holder of US debt, adding further pressure to the United States to avoid a default.

Obama sought to assure international partners that the United States would pay its bills and service its debt, but he cautioned that the ability to raise the US borrowing limit lay in the hands of the Republican-controlled House of Representatives and its leader, John Boehner.

Obama lamented the fact that repeated budget crises in the United States were hurting its reputation abroad.

"Whenever we do these things, it hurts our credibility around the world. It makes it look like we don't have our act together. And that's not something we should welcome," he said.

"If we deal with this the way we should, then folks around the world will attribute this to the usual messy process of American democracy, but it doesn't do lasting damage."

source: interaksyon.com

Wall Street ends up, but Dow, S&P fall for week as shutdown drags on

NEW YORK - U.S. stocks rebounded on Friday, but major stock indexes ended the week lower as a federal government shutdown continued for a fourth day, with no sign of an end to a budget stalemate in Washington.

The Nasdaq composite index ended the week higher as Friday's advance accelerated in the afternoon, but gains by the Dow and the S&P 500 were not enough to cancel the week's losses.

Political wrangling continued as House Speaker John Boehner and House Majority Leader Eric Cantor reiterated Republicans' call for negotiations by Democrats, but they did not indicate any change in their positions.

The government shutdown has made investors nervous as it drags on, but the impact from it has been relatively limited.

A more serious concern, investors say, is if the shutdown continues and the budget battle becomes tied up with the federal debt limit, which a divided Congress must raise by October 17 to avoid an unprecedented U.S. debt default.

"I think the market will be in a much nastier mood next week if we still don't have a deal," said Joseph Quinlan, chief market strategist at U.S. Trust Private Wealth Management.

Reflecting a rise in investor anxiety, some options investors were starting to pay more for protection against market turmoil.

The CBOE Volatility Index VIX, a 30-day forecast of stock market volatility measured using a strip of near-term S&P 500 options, rose to 16.73 on Friday from 13.12 on September 20, a sign of increased worry, although this level is still considered low.

Heavy buying activity on Thursday was seen in October and November VIX out-of-the money call options - contracts that are far from the current level - with heavy open interest additions in November contracts.

"This suggests traders are feeling the need to be protected through mid-November and implies that the market expects negotiations in Washington over the government shutdown and debt ceiling will be long and drawn out," said Matt Franz, investment adviser representative at Stutland Volatility Group.

The Dow Jones industrial average was up 76.10 points, or 0.51 percent, at 15,072.58. The Standard & Poor's 500 Index rose 11.84 points, or 0.71 percent, at 1,690.50. The Nasdaq Composite Index was up 33.41 points, or 0.89 percent, at 3,807.75.

For the week, the Dow fell 1.2 percent, the S&P 500 lost 0.1 percent while the Nasdaq added 0.7 percent. The S&P 500 has fallen for nine of the past 12 sessions.

The S&P's biggest loser on Friday was struggling retailer J.C. Penney Co fell to its lowest in more than 30 years, ending down 6.5 percent at $7.86.

Potbelly Corp said late Thursday its initial public offering of 7.5 million shares had priced at $14 each. In its first day of trading, the stock more than doubled to $31.84, with more than 14 million shares changing hands. The stock closed up 119.8 percent at $30.77.

Government economic reports have been delayed by the shutdown, and the September payrolls report from the Labor Department was not released Friday as scheduled.

Twitter Inc gave potential investors their first glance at its financials on Thursday when it filed for an initial public offering. The information showed that revenue at the social networking company almost tripled in 2012, but it posted a loss in the first half of 2013.

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said the shutdown would hurt growth in the last quarter of this year, while the Bank of Japan said an extended budget standoff would have a severe global impact.

Trading volume totaled about 5.2 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE MKT, below the average daily closing volume of about 6.1 billion this year.

Advancing stocks outnumbered declining stocks by 1,967 to 995. On the Nasdaq, advancing stocks beat decliners by 1,741 to 779.

source: interaksyon.com

Obama, congressional leaders still deadlocked on shutdown

WASHINGTON -- President Barack Obama met with Republican and Democratic leaders in Congress on Wednesday to try to break a deadlock that has shut down wide swaths of the federal government, but there was no breakthrough.

After more than an hour of talks, House of Representatives Speaker John Boehner said Obama refused to negotiate, while House Democratic Leader Nancy Pelosi and Senate Democratic Leader Harry Reid accused Republicans of trying to hold the president hostage over Obamacare.

Reid said Obama told Republicans "he will not stand" for their tactics.

As hundreds of thousands of federal employees faced a second day without pay, leaders of the Republican-controlled House of Representatives and the Democratic-led Senate offered token concessions that were quickly dismissed by the other side. Obama, meanwhile, scaled back a long-planned trip to Asia.

Republicans have tried to tie continued government funding to measures that would undercut Obama's signature healthcare law. Obama and his Democrats say that is a non-starter.

"The president reiterated one more time that he will not negotiate," Boehner told reporters after the White House meeting. "All we're asking for here is a discussion and fairness for the American people under Obamacare."

Reid said Democrats were willing to discuss any ways to tackle the budget after a temporary funding bill is passed. "We're through playing these little games," he said.

The shutdown, which took effect Monday at midnight (0400 GMT Tuesday), has raised questions about Washington's ability to carry out its most essential duties.

Though it would do relatively little damage to the world's largest economy in the short term, global markets could be roiled if Congress also fails to raise the debt limit before borrowing authority runs out in coming weeks.

The shutdown has closed landmarks like the Grand Canyon and prevented some cancer patients from receiving cutting-edge treatment.

United Technologies Corp, which makes Sikorsky helicopters and other items for the military, said it would be forced to furlough as many as 4,000 employees, if the US government shutdown continues through next week, due to the absence of government quality inspectors.

Exasperated

"Am I exasperated? Absolutely I'm exasperated. Because this is entirely unnecessary," Obama told CNBC television in an interview before meeting the congressional leaders. "I am exasperated with the idea that unless I say to 20 million people, 'You can't have health insurance,' these folks will not reopen the government. That is irresponsible."

The US Army's top general said the shutdown was significantly harming day-to-day operations, and intelligence leaders say it is undermining their ability to monitor threats. A Federal Reserve official said it could delay the central bank's ability to assess whether its monetary stimulus efforts are still needed.

The uncertainty in Washington has forced the White House to scale back an Asia trip that was designed to reinforce US commitment to the region.

Obama scuttled two stops on a planned four-country tour and left visits to two other countries up in the air. He was due to leave on Saturday and return a week later.

Secretary of State John Kerry will visit Malaysia and the Philippines in his place. Obama is weighing whether to attend diplomatic summits in Indonesia and Brunei, a White House official said.

Despite the disruption, Boehner's Republicans have failed to derail Obama's controversial healthcare law, which passed a milestone on Tuesday when it began signing up uninsured Americans for subsidized health coverage.

Though some moderate Republicans have begun to question their party's strategy, Boehner so far has kept them united behind a plan to offer a series of small bills that would re-open select parts of the government most visibly affected by the shutdown.

The Republican-controlled House passed and sent to the Senate a funding bill that would re-open the National Institutes of Health, which conducts medical research, and another bill to reopen shuttered federal parks and museums, such as the Smithsonian museums, the National Gallery of Art and the Holocaust Memorial Museum in Washington.

Both bills passed with the support of about two-dozen Democrats, who joined Republicans. The House was expected to vote Thursday on measures to fund veterans' care, the District of Colombia and the Army Reserve.

The measures are likely to be defeated in the Democratic-controlled Senate, and Obama said he would veto them if they reached his desk.

Still, they allowed Republicans to charge that their adversaries are standing in the way of help for elderly veterans and young cancer patients. "Will they now say 'no' to funding for veterans, our National Parks and the National Institutes of Health?" asked Boehner spokesman Michael Steel.

Reid told Republicans he would engage in talks about tax reform, farm policy and other pressing issues that Congress has failed to address once Republicans agreed to re-open the government without conditions. Republicans dismissed that idea.

A Reuters/Ipsos poll indicated that 24 percent of Americans blamed Republicans for the shutdown, while 19 percent blamed Obama or Democrats. Another 46 percent said everyone was to blame.

Bigger fight ahead

The shutdown fight is rapidly merging with a higher-stakes battle over the government's borrowing power that is expected to come to a head soon.

Treasury Secretary Jack Lew has said the United States will exhaust its borrowing authority no later than October 17.

The government could have difficulty paying pension checks, interest charges and other bills after that point.

Many Republicans see the debt limit vote as another opportunity to undercut Obama's healthcare law or extract other concessions -- an approach that business groups say could lead to disaster.

"You can re-litigate these policy issues in a political forum, but they shouldn't use the threat of causing the US to fail on its ... obligations to repay on its debt as a cudgel," Goldman Sachs chief executive Lloyd Blankfein told reporters after he and other financial-industry executives met with Obama.

Some Democrats have begun to consider asking Obama to unilaterally raise the debt ceiling on his own -- a move that could lead to years of court battles. The White House has said that approach is not feasible.

Asked whether there is a push underway among Democrats to convince Obama that he should use this power, a senior House Democrat who asked not to be identified said: "No, not at this point."

Stock investors on Wednesday appeared to show growing anxiety over the standoff after taking the news in their stride on Tuesday. The S&P 500 and the Nasdaq both closed down 0.1 percent.

Obama said Wall Street should be worried about the debt ceiling. "I think this time's different. I think they should be concerned," Obama told CNBC. "When you have a situation in which a faction is willing potentially to default on US government obligations, then we are in trouble."

A short-term shutdown would slow US economic growth by about 0.2 percentage points, Goldman Sachs said on Wednesday, but a weeks-long disruption could weigh more heavily -- 0.4 percentage points -- as furloughed workers scale back personal spending.

The last shutdown in 1995 and 1996 cost taxpayers $1.4 billion, according to congressional researchers.

source: interaksyon.com

Obama warns Wall Street over fiscal crisis

WASHINGTON - President Barack Obama sent Wall Street a blunt warning Wednesday that it should be very worried about a political crisis that has shut down the government and could trigger a US debt default.

Obama said he was "exasperated" by the budget impasse in Congress, in an interview with CNBC apparently designed to pressure Republicans by targeting the financial community moments after markets closed.
 




The president then met Republican and Democratic leaders for their first talks since the US government money's ran out and it slumped into a shutdown now well into its second day.

But few informed observers held out much hope for a sudden breakthrough.

Obama was asked in the interview whether Washington was simply gripped by just the latest in a series of political and fiscal crises which reliably get solved at the last minute.

In unusually frank comments on issues that could sway markets, Obama warned that investors should be worried.

"This time's different. I think they should be concerned," Obama said, in comments which may roil global markets.

"When you have a situation in which a faction is willing potentially to default on US government obligations, then we are in trouble," Obama said.

Obama said he would not negotiate with Republicans on budget matters until House lawmakers pass a temporary financing bill to reopen federal operations and raised the $16.7-trillion debt ceiling.

If the borrowing limit is not lifted by the middle of the month, the US government could default on its debts for the first time in history.

"If and when ... that vote takes place and the government reopens, and if and when they vote to make sure Congress pays our bills on time so America does not default on costs it's already accrued, then I am prepared to have a reasonable, civil negotiation around a whole slew of issues," Obama said.

The president said he had "bent over backwards" to accommodate Republicans -- a statement his foes would dispute -- but warned it would set a terrible precedent to allow lawmakers of any party to hold a White House to ransom over raising the debt ceiling.

Exasperated

"Absolutely I am exasperated, because this is entirely unnecessary," Obama said.

The government shutdown has sent 800,000 federal workers home, closed museums, national parks and monuments and crippled government services.

Obama wants a straightforward temporary spending bill to end the first shutdown in 17 years, while Tea Party Republicans have repeatedly tied the measure to a dismantling or delay of his signature health care law.

With neither side willing to budge, hopes of an early exit to the shutdown are fading.

"Most of the time you can see an end game," Republican Senator Johnny Isakson told MSNBC. "Right now there's no end game in sight."

Some signs of incremental movement emerged, with Democrats pledging to appoint negotiators to thrash out a long-term budget -- provided that the Republicans agree to an immediate six-week federal spending measure with no anti-Obamacare provisions.

Obama met at the White House with his chief political rival, House Speaker John Boehner, as well as top Senate Republican Mitch McConnell to address the standoff.

Senate Majority Leader Harry Reid and top House Democrat Nancy Pelosi were also there.

Boehner's office said the fact the talks were taking place was a victory in itself and had the potential to lead to "serious talks between the two parties."

A risk if protracted

European Central Bank chief Mario Draghi warned Wednesday that a US shutdown "is a risk if it is protracted."

"It would be a risk not only for the US, but also the world economy," Draghi said.

Obama on Wednesday gathered a group of high flying CEOs, apparently hoping they would pressure Boehner to pass a straight temporary funding bill.

Goldman Sachs boss Lloyd Blankfein warned that America was getting onto dangerous ground by flirting with not raising the debt ceiling. A previous period of brinkmanship on the issue badly hit the US credit rating.

"There's a precedent for a government shutdown, there's no precedent for a default," he said after meeting Obama.

Furious tourists meanwhile are locked out of Washington museums and monuments, as well as national parks and landmarks like the Statue of Liberty in New York. Cancer research and treatment at the world-class National Institutes of Health has ground to a halt.

The fallout has already caused Obama to shorten his long-planned Asia trip, scrapping stops in Malaysia and the Philippines that were due to begin this weekend, so he could attend to the crisis at home.

The president's attendance at regional summits in Indonesia and Brunei was also in doubt.

A no show in Asia would be seen as a blow to Obama's policy of rebalancing US diplomacy and military might towards the fast growing region.

But James Clapper, Director of National Intelligence warned lawmakers that US security was already being compromised.

Seventy percent of the intelligence workforce had been furloughed, potentially offering an opening to foreign recruiters in the field, Clapper said.

"This seriously damages our ability to protect the safety and security of this nation," Clapper said.

source: interaksyon.com

PH stock market takes cue from Wall Street, returns above 6,300-mark

MANILA - The Philippine benchmark index surged on Wednesday to return above the 6,300 mark on expectations that the US government shutdown will end soon and have a minimal impact on the world's biggest economy.

At the Philippine Stock Exchange, the bellwether index shot up 164.42 points or 2.65 percent to close at 6,362.26. All indices rallied by at least a percent led by the 3.09 percent advance of the holding firm counter.

Advancers outnumbered decliners, 99 to 46, while 40 issues were unchanged. A total of 1.3 billion stocks worth P8.23 billion changed hands.

Actively traded stocks were Universal Robina, Metrobank, Ayala Corp, PLDT and Alliance Global. Top gainers were Chemphil, TKC Steel and Bogo-Medellin, while the biggest losers were Maybank, A Brown and 2GO.

"There's some sort of relief in the Philippines after seeing the reaction of US markets overnight to the spending bill not being passed," said April Lee-Tan, head of research at COL Financial Group Inc.

"Given that in the US, the market did not react negatively, the perception is that this will not be a problem or the shutdown will not take a long time," she added.

Overnight, the Dow Jones industrial Average jumped 62.03 points, or 0.4 percent, to 15,191.70 despite the failure of US lawmakers to reach an agreement on a budget before the October 1 deadline. This triggered a government shutdown that left up to a million US federal employees on unpaid leave.

"Now that the US government has shut down, attention moves to the issue of raising the debt ceiling from $17 trillion," said Jun Calaycay of Accord Capital Equities Corporation.

"The alternative -- should the wrangling and finger-pointing continue through October 17 -- is more fear-inducing. The US will default on its loans and it may yet lose another notch off its credit rating," he said.

Earlier today, Manila-based Asian Development Bank hiked its Philippine economic growth forecast to seven percent from the original six percent estimate, while cutting its growth projection for other emerging Asian countries.

"In a way it's not surprising but any good news helps at this point," Tan said.

source: interaksyon.com

BPOs brace for lower revenues, as US shutdown coincides with peak season

MANILA - The Philippine business process outsourcing (BPO) industry expects revenues to dip in the fourth quarter, as American consumer demand could weaken as a result of the US government shutdown that began yesterday.

"In terms of volumes of calls, affected American consumers may be not buying, not transacting. These are the calls going to the Philippines," Jose Mari P. Mercado, president of the Information Technology and Business Process Association of the Philippines (IBPAP), told reporters today.



US laws forbid the outsourcing of federal work, but American legislators' failure to pass a new budget sent 800,000 government employees on unpaid leave starting yesterday.

Philippine call center volumes from the US usually climb by a quarter during the "ber" months on increased business transactions accompanying holidays such as Thanksgiving and Christmas, Mercado said.

While it is "too early to tell" how much the impact would be, reduced call volumes may eventually temper BPO firms' revenues, he said.

US clients account for two-thirds of BPO work done in the Philippines. The country's sunrise BPO industry is one of the key sources of foreign exchange earnings, which along with remittances have insulated the Philippines from the recent volatility in foreign investment flows.

Mercado said the BPO industry however is "not scared" of the shutdown, which he expects the US government to resolve soon.

"It will be fixed in a week's time. They cannot afford to remain shut down for a long time," he said.

Paul Townsend, general manager of the Philippine BPO operations of US-based Capital One Financial Corporation, said, "We do not see the shutdown impacting on our business in the Philippines.

Capital One only recently opened its BPO operations in Manila.

source: interaksyon.com

Obama cancels visit to PH on account of US shutdown

MANILA - United States President Barack Obama has cancelled his two-day visit to the Philippines on account of "issues relating to the US Government shutdown," the Department of Foreign Affairs said.

Obama's decision, said DFA, was "conveyed to President Benigno S. Aquino III" Wednesday morning, or some 36 hours after the US went into shutdown mode on account of a congressional impasse on spending.






Full text of the DFA statement issued minutes ago:

"This morning, United States President Barack Obama conveyed to President Benigno S. Aquino III that he regrets that he will not be able to push through with his visit to Manila this month. President Obama explains that this is because of issues relating to the US Government shutdown.

"President Aquino understands the decision of President Obama.  Philippines-U.S. relations remain strong and forward-looking."

source: interaksyon.com

What happens if the US government shuts down?

WASHINGTON -- A US government shutdown is possible on Tuesday, the first day of fiscal 2014, because Congress has so far failed to find a way to pay for it.

A closure would have far-reaching consequences at federal agencies dealing with everything from sending out Social Security checks to collecting admission fees at national parks.








Here is a roundup of how the impact would be felt:  


FEDERAL WORKERS: As many as 1 million US federal employees could face unpaid furloughs or payless paydays, according to the president of the American Federation of Government Employees, which represents 670,000 union members.

NATIONAL PARKS: National parks would close, meaning a loss of 750,000 daily visitors and an economic loss to gateway communities of as much as $30 million for each day parks are shut, according to the non-profit National Parks Conservation Association.

DEFENSE DEPARTMENT: All military personnel would continue on normal duty status, but many civilian employees would be temporarily furloughed, Deputy Defense Secretary Ashton Carter said in a memo. He said furlough notices would be issued on Tuesday, October 1, if no agreement to fund the government is reached.

The ratings agency Standard & Poor's said a shutdown of less than two weeks would not materially affect the credit of big defense contractors, though a longer shutdown could weaken smaller defense contractors. Most defense contractors would not be paid, new contracts would not start and orders would be delayed, with service contracts hardest hit, S&P said.

INTERNAL REVENUE SERVICE: Most of the federal tax agency's 90,000 employees would be furloughed. Taxpayers who requested an extension beyond the April 15 deadline to file their 2012 taxes must do so by October 15, and they will still be able to file these returns even if the IRS is still shut down then.

FEDERAL RESERVE AND OTHER FINANCIAL AGENCIES: The Fed would stay open, since it does not depend on congressional appropriations to operate; so would the Consumer Financial Protection Bureau, which the Fed funds. The Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency pay for themselves and would remain open. The Commodity Futures Trading Commission has been rushing through approvals for a new, untested type of trading platform ahead of a possible shutdown, its top regulator said.

JUSTICE DEPARTMENT: Fewer than 18,000 of the department's 114,486 employees would be furloughed, and if the furlough is prolonged, some of those could be brought back to work. Criminal litigation would continue under a government shutdown, while civil litigation would be curtailed or postponed as much as possible "without compromising to a significant degree the safety of human life or the protection of property," the department said in its contingency plan.

COURTS: The US Supreme Court would probably operate normally, as it has during previous shutdowns, but a spokesman declined to share the high court's plans.

Federal courts would remain open for approximately 10 business days if the government closes on October 1, and would reassess on or about October 15.

NATIONAL INSTITUTES OF HEALTH: The agency's research hospital in Bethesda, Maryland, would take no new patients.

US TRADE REPRESENTATIVE'S OFFICE: Already squeezed by automatic spending cuts imposed by so-called sequester, the USTR office has cut back on travel to the 41 countries where there are concerns about intellectual property, Trade Representative Michael Froman said.

ENVIRONMENTAL PROTECTION AGENCY: EPA Administrator Gina McCarthy said this week that the agency would effectively shut down with only a core group of individuals available in case of a "significant emergency."

AGRICULTURE DEPARTMENT: USDA meat inspectors would stay on the job, industry experts said. Statistical reports would be delayed. An October 1 shutdown would come as the agency is surveying farmers and checking fields for yields and acreage in advance of the October 11 crop report. A government closure of more than a few days could delay the report, relied upon by traders and food manufacturers as the best estimate available of the US food supply.

WASHINGTON DC SIGHTS: Some popular tourist spots in the nation's capital would probably close, including the FDR Memorial, the Kennedy Center for the Performing Arts, the Library of Congress, the Lincoln Memorial, the National Archives, the National Zoo and all Smithsonian Museums.

source: interaksyon.com

US govt shuts down

The United States lurched into a dreaded government shutdown early Tuesday for the first time in 17 years, triggering agency closures and hundreds of thousands of furloughs as Congress missed a deadline to pass a budget.

Ten minutes before midnight bells rang throughout a deeply divided Washington, and after a day of furious brinkmanship President Barack Obama's Democrats and rival Republicans, the White House ordered federal agencies to initiate their shutdown procedures.

"We urge Congress to act quickly to pass a Continuing Resolution to provide a short-term bridge that ensures sufficient time to pass a budget for the remainder of the fiscal year," Management and Budget director Sylvia Mathews Burwell said in a memo to agencies.

Lawmakers had hardly haggled over budgetary matters in the final frantic hours before the deadline -- the end of the fiscal year. Instead, they argued over whether to link the budget pact with efforts to delay Obama's health care law.

"This is an unnecessary blow to America," Senate Majority Leader Harry Reid said on the Senate floor two minutes after the witching hour.

As a mood of crisis enveloped Washington no compromise emerged to head off the first such disaster since 1996.

Instead, the Democratic-led Senate and Republican House of Representatives played a futile game, sending funding bills between them that were doomed to fail.

Obama accused Republicans of holding America at ransom with their "extreme" political demands, while his opponents struck back at his party's supposed arrogance.

Around 800,000 government workers are expected to be sent home, government services are to be slashed and monuments such as the Statue of Liberty and national parks will close.

The crisis is rooted in an attempt by "Tea Party" Republicans in the House to make passage of a new government budget conditional on thwarting Obama's signature health reform law.

The Democratic-led Senate and the president have repeatedly rejected this strategy and urged Republicans to pass an extension to government funding to temporarily stave off the shutdown.

In a deeper sense, the shutdown is the most serious crisis yet in a series of rolling ideological skirmishes between Democrat Obama and House Republicans over the size of the US government and its role in national life.

"One faction of one party in one house of Congress in one branch of government doesn't get to shut down the entire government just to re-fight the results of an election," Obama said, referring to his own re-election.

"You don't get to extract a ransom for doing your job, for doing what you're supposed to be doing anyway," he said, in a stern televised statement at the White House.

But on a day of accelerating brinkmanship, Republicans doubled down on their bid to gut Obamacare, as the health care law, the most sweeping social legislation in decades, is known.

With just three hours to go, House lawmakers passed a bill that would delay the individual mandate, which forces all Americans to buy health insurance under the new law, for a year.

"It's a matter of fairness for all Americans," said Republican House speaker John Boehner, who has struggled to control the riotous anti-government Tea Party faction of his caucus.

But the Senate, which must also sign off on budget measures, immediately rejected the bill.

That led House leaders, less than an hour before midnight, to move to go to conference, meaning the two chambers would appoint formal negotiators to thrash out a budget deal.

That process was already showing signs that it would take hours to coordinate, and Reid sent the Senate into recess until 9:30 am Tuesday.

"We said we'd go to conference if they wouldn't shut the government down, but they're shutting the government down," number two Senate Democrat Dick Durbin told AFP.

Obama warned that a government shutdown could badly damage an economy which has endured a sluggish recovery from the worst recession in decades.

"A shutdown will have a very real economic impact on real people, right away. Past shutdowns have disrupted the economy significantly," Obama said.

Consultants Macroeconomic Advisors said it would slow growth, recorded at a 2.5 percent annual pace in the second quarter.

A two-week shutdown would cut 0.3 percentage point off of gross domestic production.

It would also have a painful personal impact on workers affected -- leaving them to dip into savings or delay mortgage payments, monthly car loan bills and other spending.

Stocks on Monday retreated as traders braced for the shutdown. The Dow Jones Industrial Average was down 128.57 points (0.84 percent) to 15,129.67.

Markets are likely to be even more traumatized if there is no quick solution to the next fast approaching crisis.

Republicans are also demanding Obama make concessions in the health care law to secure a lifting of the current $16.7 trillion debt ceiling, without which the United States would begin to default on its debts for the first time in history by the middle of October.

Polls show more Americans would blame Republicans for the shutdown than Democrats, leaving Boehner torn between his party's wider political interests and a vocal section of his own party.

source: interaksyon.com