The Shutdown Begins:What It Means To You

There have been 17 US Government shutdowns since 1970,and the last one was 17 years ago,in 1996 under President Bill Clinton.At that time,18.6% of government workers were furloughed,and it lasted for 21 days-the longest shutdown to date.
Before that one,there were two shutdowns in 1995.The first of those shutdowns resulted in a market rally.The second 1995 shutdown caused a market plunge,then a flattening out.
According to Tom Switzer of the US Studies Centre in Sydney,the last shutdown,in 1996,cost the Republican party dearly at the polls.In the end,it also led to significant compromise that resulted in economic prosperity.
This time around,the debt ceiling issue in about two weeks' time is even more important than the shutdown.If that goes unresolved,it'll probably spike an economic downturn.Now it's a very polarised environment.A dysfunctional hegemon will be bad for the US and for world markets.*
On a practical level,essential services such as national security and law enforcement,as well as air traffic control and pension payments,will continue to be provided.National parks will close,however,and 800,000 government workers will be laid off,crimping retail sales and tax revenue.The shutdown will untimately cost the government 300 million dollars a day,IHS calculated,and Bank of America said a two week shutdown would shave a half percent off GDP growth.*
US stock futures rose slightly,along with Asian stocks,immediately the shutdown began at the stroke of midnight Tuesday.Apparently everyone who wanted to sell the news had already done so by the time it actually happened.In the commodities markets,gold was flat and oil declined about a half percent.*
If the US Government is dysfunctional,the Japanese government is anything but.The Japanese Tankan survey showed soaring business confidence;and the Abe government announced it will raise the sales tax from 5% to 8% in April 2014,then to 10% in 2015.There will also be a 50 billion dollar stimulus package to cushion the effect of the sales tax increase.

Asia This Day-plus Syria

Australian elections have been called for Saturday 7 September.This sent the ASX 200 index up 1.04%.*India's GDP for Q2 was up 4.4 year over year,down from 4.8 in Q1.The country's inflation and fiscal deficits are very high,noted Rajiv Biswas,Chief Asia Economist at IHS.*China's official August PMI was 51.0,indicating that a manufacturing recovery is underway.*You have to approach it from a corporate governance point of view,said Sam Le Cornu,Portfolio Manager at Macquarie Asia.You need to do a lot of work,meeting with management personally.We particularly like consumer discretionary.We really like Chinese equities.We're buying the Hang Seng.*We have a very strong ASEAN watch list.We're waiting for prices to come down.*EM is cheap.We're staying long China.We like North Asia.We're adding to Korea and like Taiwan.*We're looking for high quality management and strong balance sheets.We still say today Asia is full of risk.Our job as analysts is to quantify risk,Mr.Le Cornu told Bloomberg TV.*The MSCI Asia Pacific index was up 0.39% in early Monday trading.Gold and oil prices fell on the delay of US military action against Syria,which is widely seen as weakness.This goes to the core of American credibility in foreign policy and I believe Congress will do the right thing,Secretary of State John Kerry said.The President of the United States has the right to do this.He doesn't have to get approval.*Members of Congresss got lengthy classified breifings on Syria Sunday by administration officials,but some expressed a high degree of scepticism.*Syrian opposition leaders are bitterly critical of the delay,while Syrian officials reportedly believe Congress will not approve a military strike against them.