Safe Haven Markets Slide as Investors Expect Resolution to US Government Shutdown

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Safe Haven Markets Slide as Investors Expect Resolution to US Government Shutdown

Safe Haven Markets Slide as Investors Expect Resolution to US Government Shutdown


It's strange to think that just a few months ago you could barely pick up a newspaper without reading about some doom and gloom that was going to plunge Britain into a triple-dip recession.

Now we're being warned about a housing bubble and our posties are about to share in a windfall from the Royal Mail IPO.

It's like the New Labour years all over again.

For the time being though, we should be pleased with the momentum building in the UK economy and all the signs suggest that growth is becoming broader based, with positive indicators from the services, manufacturing and construction sectors.

Growth of 0.7% in the second quarter beat expectations and City sources tell me that we are on course for even stronger growth in the third.

We will have to wait until 25 October for the Office for National Statistic's first stab at a number.

Meanwhile, the Bank of England has made it very clear that monetary policy will remain ultra-loose for several months.

US Government Shutdown Dictates Market Direction

I'm told that the relative calm in the UK is unlikely to be hit by the US government shutdown; although a US default would be an entirely different matter.

Until the shutdown and the debt ceiling talks are resolved, we do not know what will happen to US GDP, unemployment or consumer confidence.

A default is not out of the question which means the future is impossible to predict until the political impasse is resolved on Capitol Hill.

Interestingly, the price of gold has actually fallen in recent days, which implies investors believe a resolution is likely.

Gold is, of course, a fear trade and it looks like the metal may have made its day in the sun, for now.

Advocates predicting a rise to $2,000 an ounce are now few and far between.

City scribblers I know tell me that the situation looks good for the wider commodity market despite concerns about growth in emerging markets.

Currencies in places such as India, Russia and Brazil have tumbled of late, but the downside from here looks pretty limited.

Chinese economic data is good and miners are starting to realise that supply discipline is important, so they don't flood the market with product.

However, the only game in town at the moment US politics.

This will determine the direction of markets over the next few weeks.

Until next time...




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