00:00The United States government shutdown has entered its 15th day, leaving key economic data unpublished now for more than two weeks.
00:07This absence of information could soon concern policymakers, both in America and abroad,
00:12given the U.S.'s significant influence on the global economy.
00:16Fiona Sincotta is an analyst at Citi Index.
00:19Fiona, how significant is this data blackout for markets and policymakers?
00:25I mean, the longer that it goes on for, the more significant it becomes,
00:32because, you know, this economic data is what the Fed uses, is what the market uses to be able to assess the health of the U.S. economy
00:40and then what the Federal Reserve will likely do as far as interest rates are concerned.
00:47I mean, we did hear from Federal Reserve Chair Jerome Powell yesterday,
00:49and he had suggested that private measures and the Fed's internal research is sufficient at the moment
00:59to be able to assess that the U.S. jobs market is cooling and that inflation expectations are anchored.
01:06But as I said, the longer that this goes on for, the more blind the Fed will be flying and the markets.
01:11I wonder what the immediate consequences are for the bond market, particularly treasuries,
01:17when inflation data and Fed commentary go dark, as it were.
01:24Back to have sort of near-term volatility.
01:27I mean, and also this sort of flight to safety, which is when the investors sort of move into treasuries,
01:35which actually pulls the yield lower.
01:37And now obviously this is, we're having this at the same time that we're also seeing the Federal Reserve suggest
01:43that they are potentially going to be cutting interest rates again in October,
01:46and also with the U.S.-China trade tensions ramping up again,
01:52which is also sort of driving that slight flight to safety.
01:56So actually the 10-year Treasury yield at the moment, we're seeing that down,
02:00hovering around levels that were last seen in April.
02:02And how does this data darkness in the United States impact global markets?
02:08I'm thinking especially of Japan.
02:12Yeah, so I mean, Japan is particularly sensitive to the U.S. yield moves.
02:19And I think, you know, the biggest problem that we're going to have here
02:21is trying to be able to assess that differential between Japanese yields and U.S. yields,
02:29when we're not really necessarily knowing the data to be able to support the U.S. yield
02:34and where it should be.
02:35I mean, so what we would also expect to see potentially is that strengthening of Japanese yen.
02:41It's a safe haven.
02:42And we have actually seen it strengthened over the last couple of days.
02:45But it's also worth keeping in mind that there is some political uncertainty happening in Japan at the moment,
02:51which could actually limit potential gains that we may have otherwise seen in the Japanese yen.
02:56Fiona, your take on Morgan Stanley and Bank of America results out now, both topping estimates.
03:03I wonder what does that tell us about the U.S. economy?
03:08Yeah, so I mean, some blowout results here from the banks, you know,
03:11especially that investment banking arm, similar to what we saw from J.P. Morgan yesterday.
03:18And what we're seeing is, you know, the environment does seem to be ripe for increased investment banking activities,
03:25deal-making, IPOs, M&As, mergers and acquisitions,
03:29basically because we seem to be seeing resilient growth at a time where interest rates are expected to come down.
03:36And that does provide a pretty solid base for economic activity, which is an encouraging sign.
03:43Fiona, good to see you.
03:43Thanks so much for coming back on the programme again.
03:45Fiona St. Cotter, the analyst at City Index.
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