ON DECK FOR TUESDAY, SEPTEMBER 26
KEY POINTS:
- A worse than typical September for US equities
- Progress toward averting a US government shutdown?
- US consumer confidence, housing data on tap
Equities continue to push lower. This has been a classic September directionally speaking, conforming to the tendency for risk-off movements during this month. The magnitude of the correction is worse than a typical September, however, and with the sole exception being the FTSE100 (charts 1–3). The S&P is down almost 4% on the month, the Nasdaq is 5½% lower and the TSX is 2½% lower. Key is whether this is just the usual September effect, or something deeper especially given the likelihood of another Fed hike this year and that equity benchmarks have been sailing along oblivious to the Fed’s tightening thus far. US Ts are slightly richer across the curve. The USD is flat on a DXY basis.
The macro calendar has a few light releases out of the US on it. The biggest on is consumer confidence that is forecast to slip (10amET). So are new home sales (10amET).
There may be progress toward averting a US government shutdown on two fronts. The House is plotting use of a so-called ‘discharge petition’ in which Dems would join with several GOP moderates to thwart Speaker McCarthy’s power. At the same time, the Senate is advancing a bill to extend funding for a few weeks and if passed would then go to the House for McCarthy to decide whether to bring it to a floor vote. In that case, some suggest his deal with the extreme minority of members would put him out of a job which might not be a bad thing. Moody’s threatened a downgrade on a shutdown late yesterday which is more about catching up to S&P’s move to strip the US of its AAA rating ages ago and Fitch’s move in late July.
Overnight developments offered little by way of any macro risk. Chinese equities continue to soften on property finance headlines. At 6 times trailing and around 8 times forward earnings it’s hard not to see a lot of bad news priced into the Hang Seng.
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