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U.S. Government - What Will "shut down"?

Politics / US Politics Oct 02, 2013 - 12:34 PM GMT

By: Sahil_Hafeez


Democrats and Republicans were unable to intention their contrasts over Obamacare and now the government is closed down.

Republicans in Congress declined to embrace a using bill unless it postponed the Affordable Care Act, the law conveying health protection to poorer Americans, which began to assume Oct. 1. Right away, the new monetary year begins; government authorities won't have the power to use money.

  • U.S. Postal Service
  • Social Security, Medicare and Medcaid
  • Metro
  • Circulator
  • Public schools
  • Federal courts
  • Airports
  • Military
  • Patent and Trademark Office
  • Amtrak.
  • Kennedy Center
  • Food inspectors
  • Supplemental Nutrition Assistance Program
  • Federal prisons

What will close?

  • Energy, except for those overseeing the safety of the nation's nuclear arsenal, dams and transmission lines
  • EPA
  • Health and Human Services
  • FDA
  • National Parks
  • Bureau of Labor Statistics
  • Smithsonian
  • National zoo
  • U.S. Capitol
  • WIC program

What will probably not close?

  • Passport office
  • D.C. trash collection
  • Government contractors
  • Immigration services
  • VA disability claims
  • Paid museums
  • National Archives
  • D.C. Superior Court
  • Federal websites
  • Paid museums
  • IRS

Most different offices can work for a few weeks with subsidizing, and all organizations that have to do with security are exempted from a shutdown.

Unexpectedly, the government shutdown might not stop Obamacare. That is since 85% of its financing is part of the Mandatory budget, much the same as Social Security and Medicare. It has recently been sanctioned by the Affordable Care Act, and the budget essentially appraises what amount might be used.

How markets worldwide reacted today on US government shutdown?

US stock market:

Dow Jones and S&P 500 remained firmer yesterday. The U.S. shutdown is an essential issue for the markets, yet as long as the hope for just a transitory shutdown exists; it won't be an in number trouble for equities.

US Dollar:

It is the first shutdown in 17 years and the dollar fell right off the early Tuesday, sending it to an eight-month low against the euro.

The dollar exhausts the brunt of the reaction, hitting a 1-1/2 year low against the safe-haven Swiss franc and a close to 8-month low against a basket of widely-traded currencies.

 It is my advice that "In the short term, it would be better to keep away from the dollar."

Brent crude:

It fell to close $108 a barrel, not a long way from a 7-week low, on stresses that the U.S. government shutdown might cease oil demand. U.S. crude was at $102.29, down 5 cents.


An alternate conventional safe haven asset, popped higher after the shutdown came to be obvious, hitting $1,331.50 an ounce, however was well within its later $1,300 to 1,350 ranges.

U.S. stock index futures:

On the other hand, U.S. stock index futures indicated increases when Wall Street opens later with the broad S&P stock contract edging up 0.4 percent.

U.S. Treasury note:

The price of the 10-year U.S. Treasury note has fallen, lifting the yield 3 basis points to 2.645 percent.

Europe market:

Europe's broad FTSEurofirst 300 index, amplifying a stellar execution in the September quarter, crept up 0.3 percent however not a long way from a three-week low was.

MSCI's world equity index:

It tracks shares in 45 countries, was up 0.2 percent by midday in Europe, helped by gains in Asia after investors foreseeing the news had triggered its greatest daily fall of September on Monday.

Asian Markets:

Japan's Nikkei, South Korea's Kospi and Indian stocks were modestly higher yet KSE index fell by 554 points on institutional selling and Australia's S&P ASX 200 shut down 0.2 percent. Among emerging markets, Thailand's SET index record energized 1.8 percent and the Jakarta Composite finalized the session 0.7 percent higher.

What would happen if shutdown continues for longer time?

In the event that the shutdown proceeds past two weeks, it will abate economic growth and more than 800,000 federal employees face unpaid leave. Exacerbating that, Washington must additionally raise the debt ceiling at that point. Goldman Sachs evaluates a three-week shutdown could shave to the extent that 0.9% from US GDP this quarter. To what extent this impasse in the U.S. will keep going. In the event that it perseveres, there is a chance it will harm economic growth and affect chances of Fed tapering. The true center for markets is Oct. 17 when the debt ceiling issue will go to the fore once more.

By Sahil Hafeez

Qualifications: MBA, CFA, FRM
Current City: Hong Kong

© 2013 Copyright  Sahil Hafeez - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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