Post date: Oct 07, 2013 1:9:47 PM
The U.S. shutdown comes up to the one-week mark and Speaker John Boehner says there won't be any deal to lift the debt ceiling without conditions attached.Richard Hunter, Head of Equities at Hargreaves Lansdown, says the shutdown still remains secondary to worries over the debt ceiling resolution.
LONDON, ENGLAND, UK (REUTERS) (OCTOBER 7, 2013) - JOURNALIST ASKING RICHARD HUNTER: "It's the second week of the US government shutdown and so far, investors seem to have been pretty complacent. But is this getting real now?"
RICHARD HUNTER: "As the days tick by, it certainly is. I mean in terms of the shutdown itself, it's probably too early to have too much of an effect on the US GDP. And from the investment point of view, it's almost a sideshow to the debt ceiling and the all-important date of the 17th of October. What I suspect is going to happen is it - however sanguine markets have been so far, as we tick nearer to the 17th of October without any resolution, we can expect to see some fairly choppy markets."JOURNALIST: "Do you think that the US default is looking like a possibility now?"
RICHARD HUNTER: "Well it's always a question of uncertainty, of course. And whilst it remains almost unthinkable that the US would drive itself down this particular road and begin to default on some of its obligations and all the subsequent implications that would have on the global economy, of course, we can't say for sure that it won't happen until such time it seems to be at least a chink of light in terms of the negotiation between the parties out in the state. So with that in mind, every single release that's coming out, be it from the President or from his opposition has been gone through with a fine-toothed comb just to look for some small chinks 1124of positivity."
JOURNALIST: "I mean as you say, the latest signs so far at least aren't encouraging. How are you positioning yourself at the moment?"
RICHARD HUNTER: "I think it's fair to say we've seen the markets spike sort of 1% up, 1% down. The Dow Jones finished 1% up for example on Friday, but that's on the back of fairly light volumes which tends therefore to exacerbate market movements. I think it's fair to say that until we get some sort of resolution at least on the horizon to a situation, a lot of investors are simply standing back keeping their money off the table. Just in case the unthinkable happens."
JOURNALIST: "There's a report in the FT that John Paulson and a clutch of US hedge funds are leading the charge into Greek banks. Do you think this is premature given that there's still talk of a third bailout for Greece?"
RICHARD HUNTER: "Strangely, as there have been so few investment destinations for negative real returns on cash over the last six months, increasinglyEurope has been mentioned about potentially being at the start of its recovery story. Certainly, if we compare the situation in the Eurozone today to 18 months ago, fears of default and debt in general seemed to have been supplanted by trying to get the Eurozone into growth. So it's certainly for the more aggressive investors to be dipping their toe in European waters but it's not been unheard of over the last couple of months."