Market Update – 27th September 2023.

27th September 2023

With a scarcity of significant economic data releases so far this week, the attention of market participants has predominantly centred around a threat of a Government shut down in the US. Political deadlock is currently occurring in the world’s largest economy over disagreements concerning public spending cuts that are being championed by the Republican party. Although limits were agreed only recently in the run up to the debt ceiling, Republicans are now intercepting any new monetary compromises as they feel too much was conceded to President Biden to get the debt ceiling bill passed. The US Government has until the 30 September to pass 12 appropriation bills that will fund government operations for when the financial year starts on the 1 October. While this may create temporary noise in the markets, in the past House Speaker Kevin McCarthy has floated a 45-day extension in order to keep Government open and we may see this happening again. The broader stock market, in general tends to remain relatively unaffected by such shutdowns. However, companies heavily reliant on government spending may experience adverse consequences.

Further data this week revealed that US consumer confidence fell, dropping from 108.7 in August to 103 in September. Consumers are being stretched by price growth and it is possible that we may see further reduced spending until the Fed manages to get inflation fully under control.

Sources have revealed this week that there are some offshore creditors of China’s Evergrande Group planning to throw weight behind a legal petition to send them into liquidation. The creditors are said to be displeased with Evergrande’s recent offshore debt restructuring plan after the Group said they were unable to issue new bonds. Creditors are reported to be giving Evergrande until next month to present a new debt plan, which they will be keen to do to keep momentum rolling on the host of recent stimulus measures China has undertaken to boost economic growth.

Still to come this week we have US durable goods orders and final Q2 GDP figures for the US and UK. We also have preliminary eurozone inflation data, the Fed preferred measure of inflation PCE and Michigan consumer sentiment.

Nicola Tune, Portfolio Specialist