11:30 AM New York – U.S. market indexes traded lower as the debt default date approaches and rating agencies remain quiet. The dollar eased and credit default swaps on U.S. Treasuries rose to 39 basis points. European markets trade lower in cautious trading.
Stocks on Wall Street trended lower as investors finally begin to factor possible debt default in the event politicians fail to agree on debt limit revision before Thursday.
Increasingly investors are wondering whether politicians will react only after markets send a strong signal and that may force market indexes sharply lower in the next few days.
Credit default swaps on U.S. Treasuries increased five points to 39 basis points compared to 21 basis points last month. The default swaps traded as high as 65 basis points in 2011 when Congressional leaders held up debt ceiling revision to the last minute.
If debt ceiling is not raised by October 17, Treasury Secretary Jack Lew said U.S. expenses will exceed revenues. Private estimates suggest that the U.S. expense can run twice the revenues on certain days between October 23 and October 30.
S&P 500 index declined 0.4% to 1,695 and the Nasdaq Composite Index eased 0.3% to 3,780.78.
The dollar declined 0.2% to $1.358 against one euro and gained against the yen to 98.19. Gold gained 1% to $1,284.88 an ounce.
Markets in Europe were also lower as world investors turn cautious on the fourteenth day of the U.S. government closure.
DAX 30 index in Germany declined 0.1% to 8,712 and CAC 40 index in Paris fell 0.2% to 4,213.
Markets in Japan, Hong Kong and Indonesia are closed and the U.S. Treasury market is closed for Columbus Day holiday.
China’s Exports Decline and Inflation Accelerates
China reported a decline in exports in September. Overseas shipments declined 0.3% from a year ago to $185.2 billion and imports in the month rose 7.4% to $160 billion.
Trade surplus in September declined to $15.2 billion from $28.5 billion in August.
Exports increased 7.2% in August and in the latest month shipment to many regions in the world were lower than expected in the reported data.
Exports growth to the U.S. declined to 4.2% from 6.1% in August and exports to South Korea, Taiwan and the European Union declined from a year ago. Exports to the EU declined 1% compared to 2.1% in August.
China also said its foreign reserves jumped to $3.66 trillion in September from $3.5 trillion in June, the central bank said.
Separately, statistics bureau said consumer price index increased 3.1% in September, faster than 2.6% in August. The government has target inflation in the range of 3.5%.
Wholesale Inflation in India at 7-Month High
Rupee in India declined 0.8% after wholesale inflation accelerated to a seven-month high in September to 6.46% from a year ago compared to 6.1% in August.
Consumer prices increased 9.84% in September after rising at 9.52% in August, a government report showed today. Food prices soared 18.4% in the month and fuel and power prices soared 10% and onion costs soared 323%.