Tuesday, October 15, 2013
STOCK FOCUS: U.S. Fiscal Debate Holds Shares In Tight Range
TOKYO (NQN)--Hopes that the fiscal debate in the U.S. will soon end helped briefly lift the Nikkei Stock Average by more than 100 points Tuesday morning to put it above 14,500 for the first time in eight trading days. Congressional leaders have yet to reach an agreement, however, prompting some investors to head for the sidelines. Later in the early session, the market became top heavy.
It has been two weeks since the U.S. government shutdown began. With the Democrats, Republicans and the White House deadlocked over the interim budget and debt-ceiling issues, the Dow Jones industrial average briefly fell to its lowest level in one and a half months. But Wall Street is recovering.
In Tokyo, the Nikkei average fell to the 13,700 line at the start of last week, its lowest since early September. Later, however, the index climbed back to the 14,500 line.
Behind the latest rally are expectations that the fiscal wrangling in the U.S. will end soon. Democratic and Republican Senate leaders met Monday to discuss raising the upper limit of the government debt ceiling and ending the shutdown. Majority Leader Harry Reid, a Democrat, and Minority Leader Mitch McConnell, a Republican, agreed that the discussion was meaningful, suggesting an end of the fighting may be near.
Even if the U.S. government reaches an agreement, market players will not be willing to take risks if the Democrats and Republicans start fighting again in the next three to four months, said Hiroki Shimazu, senior market economist at SMBC Nikko Securities Inc. As long as there is concern that the U.S. government will push back the deadline for raising the debt ceiling, the yen will not fall further against the dollar.
Yutaka Miura, senior technical analyst at Mizuho Securities Co., said the short-term outlook for the upper end of the Nikkei average is 14,800, equivalent to the lows logged in July and September.
Since the beginning of this year, the correlation coefficient between the Nikkei average and the yen-dollar rate has been -0.9, indicating a strong inverse relationship between stronger stocks and the weaker yen. The upper end for the Tokyo stock market and the bottom end of the yen-dollar rate may not change much if Washington does not quickly resolve its fiscal issues.
-- Translated from an article by NQN staff writer Atsushi Ohtani
(Nikkei Quick News, Oct. 15)