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Note from the MD: Equities on alert as US debt ceiling deadline approaches

September 29, 2021

Note from the MD: Equities on alert as US debt ceiling deadline approaches

Investors are keeping a close eye on the US Congress this week as the deadline to raise the American government’s debt ceiling fast approaches and Republicans are standing firm on their vow not to vote for an increase.

Investors are keeping a close eye on the US Congress this week as the deadline to raise the American government’s debt ceiling fast approaches and Republicans are standing firm on their vow not to vote for an increase.

The Democrats still have a few other options to avoid the looming government shutdown that would quickly follow if no agreement is reached by September 30, but the stand-off is weighing on markets.

Many of you will no doubt remember what happened in 2011 when a similar scenario played out, prompting Standard and Poors to drop the country’s credit rating from AAA to AA+ while stocks plummeted. This week, Congress will have their last chance to resolve the issue.

With the XJO experiencing it’s 3rd major sell-off in September 2021 and maintaining price action below the 50 DMA we are suspecting a change in market behaviour and are watching closely for key support levels to come into play. We expect the 7200 level to be tested during today’s session, and if the sellers can push the market through this support, we see the next major support at the 200 DMA. If the market hits the latter, we expect a short term rebound then will be watching for the market to decide future behaviour.

Yesterday’s pain extended to the Emerging Companies index (ASX: XEC) and the Small Ordinaries (ASX: XSO), which gave up 0.73% and 1.22% respectively.

Nevertheless, energy companies powered on, fueled by increasing oil prices. 

Beach Energy (ASX: BPT) was a particular standout. Its shares jumped 10.52% after an investor update revealed it’s on track to meet emissions targets while growing its material gas production in the near-term.

Carnarvon Petroleum (ASX: CVN), Whitehaven Coal (ASX: WHC) and New Hope Corporation (ASX: NHC) all climbed more than 5%, while Cooper Energy (ASX: COE) and Senex Energy (ASX: SXY) posted gains north of 4%.

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