A Debt Deal Has Been Reached — Now What?

The compromise between Congressional leaders and the White House reached on Sunday allowed us to all breathe a sigh of relief, for now. But, as always, the devil is in the details and new economic figures are not painting a pretty picture of the recovery we assumed to be ahead.

The New York Times reported yesterday that any relief over the last-minute agreement on a framework in Washington to raise the United States debt limit was short-lived. After a short burst that put the three main Wall Street indexes up more than 1 percent, they turned negative as reality caught up with investors.

The dip coincided with the release of new data that showed American manufacturing growing more slowly. The Institute for Supply Management reported that its index registered 50.9 percent in July; with a reading over 50, that means the manufacturing sector expanded for the 24th consecutive month. But it did so at a slower rate, registering below the 55.3 of June, the survey showed. Production and employment also showed continued growth in July, but at slower rates than in June.

In the article, Nick Kalivas, vice president of financial research at MF Global said, “The market is focusing on the global growth picture.” This means the focus is off Washington and back on the volatile European markets, as well as Asia export, which remains embroiled in a dollar vs. yen stand-off.

The debt woes in the United States had undermined the dollar’s value in international currency markets in recent weeks, especially against the yen—a worrying trend for Japanese exporters, as a strong yen makes their goods more expensive for shoppers overseas.

We are sure to see the consequences of U.S. and global events take a toll on various import and export markets in the weeks and months to come. As the Times reports, trade with Asia and the health of European markets have widespread effects on business strategies globally. How are you tracking the effects of current events on your business? Open up markets and track trends using PIERS intelligence to keep up.

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