Europe’s Tentative Recovery Spreads South In September

“Whilst the repercussions of a shutdown didn’t seem to worry markets too much, the rigid stubbornness from politicians has traders fearing that the same uncompromising mentality will carry over to the debt limit debate,” Capital Spreads trader Jonathan Sudaria wrote in a note. The shutdown has delayed the closely-watched nonfarm payrolls data, normally out on Friday. The data is a key factor for the Federal Reserve to consider when deciding to scale back its stimulus. Two senior Fed officials warned on Thursday of damaging consequences if the country defaults on its debt and said U.S. monetary policy is being kept easier to help offset the harm caused by the political wrangling in the Capitol Hill. After hitting a five-year high in mid-September, the FTSEurofirst 300 index of top European shares has slipped 2.6 percent in the past two weeks, hurt by the budget standoff in Washington as well as a fresh political crisis in Italy. Italy will be in focus again on Friday as a Senate committee holds public hearing on whether to expel former Prime Minister Silvio Berlusconi. The panel is expected to recommend the media tycoon should lose his seat in parliament following an August conviction for tax fraud. Earlier this week, Berlusconi backtracked from attempts to bring down the Italian government. ——————————————————————————– MARKET SNAPSHOT AT 0630 GMT: LAST PCT CHG NET CHG S&P 500 1,678.66 -0.9 % -15.21 NIKKEI 14,024.31 -0.94 % -132.94 MSCI ASIA EX-JP 544.50 -0.06 % -0.31 EUR/USD 1.3625 0.06 % 0.0008 USD/JPY 97.06 -0.19 % -0.1800 10-YR US TSY YLD 2.625 — 0.02 10-YR BUND YLD 1.812 — 0.00 SPOT GOLD $1,318.58 0.14 % $1.89 US CRUDE $103.14 -0.16 % -0.17 > GLOBAL MARKETS-Stocks sag, Dollar near 8-mth low on US worries > US STOCKS-Wall St ends lower as shutdown continues for third day > Nikkei drops to 1-month low on US govt shutdown, budget concerns > FOREX-Euro eyes 2013 peak, dollar undermined by Washington impasse > PRECIOUS-Gold set to end week lower but U.S. shutdown stems losses > METALS-Copper heads for weekly loss as US fiscal woes weigh > Brent drops below $109 on US demand concerns, but storm limits losses COMPANY NEWS: TELECOM ITALIA Telecom Italia said on Thursday it had picked insider Marco Patuano as new chief executive after long-standing executive chairman Franco Bernabe resigned in a strategy clash with core shareholders. FINMECCANICA The board of the aerospace and defence group will meet on Friday to decide on an offer from state-owned agency Cassa Depositi e Prestiti to buy a 80-90 percent stake in its power engineering unit Ansaldo Energia, a source familiar with the matter said on Thursday.

“We expect this to bounce back, but this suggests we could see a slightly slower pace of growth in the third quarter relative to the second quarter.” PMI compiler Markit said its surveys suggested the euro zone economy grew around 0.2 percent from July through September, a touch below the 0.3 percent registered in the second quarter. Nomura’s Matthews said they suggested a slightly stronger rate of growth for the final months of the year. STILL NOT ON SOLID GROUND Markit’s Eurozone Services PMI rose to 52.2 in September from August’s 50.7, little changed from a preliminary reading of 52.1. Readings above 50 signify growth. Businesses in No.1 economy Germany reported rising new orders and staffing levels, while France’s private sector grew for the first time in a year and a half. The upbeat mood was further bolstered by news that euro zone retail sales jumped 0.7 percent in August, month-on-month, hitting the top end of forecasts. Draghi said on Wednesday the euro zone economy still faced downside risks. Chris Williamson, Markit’s chief economist, said the surveys pointed to slightly stronger growth towards the end of this year, even if the region was not out of the woods. “The political instability that has reared up in Italy is a reminder that there remains plenty of scope for recoveries to be derailed,” said Williamson. Italian Prime Minister Enrico Letta won a confidence vote in parliament on Wednesday after Silvio Berlusconi, facing revolt in his own party, backtracked on threats to bring down the government. The Italian services PMI topped the 50 growth threshold last month for the first time since May 2011, which could signal a timid recovery towards the end of the year. British business again showed the fastest pace of growth among Europe’s major economies last month. Although the Markit/CIPS UK Services PMI eased to 60.3 from August’s near seven-year high of 60.5, it still showed strong momentum in British business, helped by a recovery in the housing market. “Such strong confidence also suggests that the UK economy has enough momentum to end the year strongly,” said Christian Schulz, senior economist at Berenberg Bank. Financial markets were little changed on the data, taking their direction instead from the U.S.

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