Shutdown Day Eight

Economic Data

- (DE) Germany Aug Factory Orders M/M: -0.3% v +1.1%e; Y/Y:3.1 % v 4.0%e

- (EU) OECD Aug Inflation Y/Y: 1.7% v 2.0% prior

- (PT) Bank of Portugal reports Sept ECB financing to Portuguese banks at €51.9B vs. €51.6B (4th straight monthly rise to an eight month high)

- (CL) Chile Sept CPI M/M: 0.5% v 0.5%e; Y/Y: 2.0% v 1.9%e; CPI Core M/M: 0.6% v 0.4%e

- (BR) Brazil Sept FGV Inflation IGP-DI M/M: 1.4% v 1.5%e

- (US) Sept NFIB Small Business Optimism: 93.9 v 94.3e

- (US) ICSC Chain Store Sales w/e Oct 4th: w/w -0.1%; Y/Y: +1.8%

- (CA) Canada Sept Housing Starts: 193.6K v 185.0Ke

- (CA) Canada Aug Int'l Merchandise Trade: -C$1.3B v -C$0.7Be

- (US) Redbook Retail Sales w/e Sept 4th: +3.3% y/y, Sept MTD: -0.5% m/m; Sept YTD: +3.7% y/y

- (US) Oct IBD/TIPP Economic Optimism: 38.4 v 46 prior

- The shutdown dragged into its eight day today and the awaited financial market freakout has not arrived as of yet to compel action in Washington, DC. Traders continue to watch short-term rates move much higher: one-month USTs are now at a higher than LIBOR for first time in at least 12 years. As of writing, the DJIA is down 0.41%, the S&P500 is down 0.18% and the Nasdaq is down 1.0%.

- The Republicans continue demand negotiations on "spending cuts" while passing more bills to provide limited funding to certain parts of the government. However, the incoherence of their demands is becoming very hard to ignore and Speaker Boehner is still refusing to bring a CR funding bill up for a vote, even as he insists the measure would never pass. Meanwhile in the Senate, Sen Reid will likely introduce a debt limit increase bill that would provide borrowing authority through to 2014 and expects to get 60 votes without conditions. Both Japan and China, the first- and second-largest holders of USTs, have now formally demanded that the Congress ensure the stability of their very substantial investments.

- In FX trading, sterling hit session lows early this morning as severe volatility and confusing followed the BoE's "LTRO announcement." Despite the use of an acronym more associated with the ECB's special funding mechanisms, the operation is one of the BoE's regular functions. After dropping to 1.6016, GBP/USD rebounded above 1.61 handle. USD/JPY pair briefly traded below its 200-day moving average for the first time since mid-Nov 2012.

- The IMF reduced forecasts for global growth in its World Economic Outlook this morning, warning that emerging economies have cooled off, Europe remains in the doldrums, the US is facing fiscal uncertainty and global ramifications of QE tapering are becoming clear. The IMF cut its 2013 global GDP outlook to +3.1% from +3.3% prior and its 2014 outlook to +3.8% from +4.0% prior.

- JC Penny gained as much as 6% this morning after disclosing September comps only declined 4%, which is a huge improvement over the double-digit declines seen earlier in the year. The firm also made other reassuring comments about a return to more normal business conditions. Shares of JCP have given up some of these gains in mid-morning trade.

- Samsung Electronics must stop importing certain models of its smartphones and tablet computers after the Obama administration let stand a ban won by Apple in a patent-infringement dispute.

Looking Ahead

- 11:30 (US) Treasury to sell $35B in 4-Week Bills

- 11:45 (EU) ECB's Weidmann (Germany) speaks in Berlin

- 12:00 (CH) SNB President Jordan at Peterson Institute

- 12:00 (US) Oct DOE Short-Term Crude Outlook

- 12:25 (US) Fed's Pianalto speaks on Economy in Pittsburgh

- 12:30 (US) Fed's Plosser speaks on Economic Outlook and Monetary Policy

- 19:50 (JP) Bank of Japan (BOJ) September 4-5 meeting minutes