Wall Street shows signs of fatigue as McConnell sets an IED

<p>Kia ora, </p><p>Welcome to Monday's Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news it’s a week where central banks may have to rescue dysfunctional public policy again.</p><p>First in the US, there is another Fed policy position review this week on Thursday and all eyes will be on tapering signals. But this decision is likely to be overshadowed by the growing partisan fight in Congress over raising their debt ceiling. While the Democrats granted the Trump presidency a holiday from this self-imposed restriction, the Republicans are using it to hobble the Biden spending plans. This seriously raises the likelihood of a technical US default soon - they will make their debt payments, just not on the scheduled dates.</p><p>This intransigence triggered UST bond yields to rise at the tail end of last week. It may also weigh on the Fed's decision-making.</p><p>And the closely-watched <a href="http://www.sca.isr.umich.edu/" target="_blank"><strong>University of Michigan sentiment survey</strong></a> came in at the same level in September as it was in August - and that isn't good because August was a sharp dive to a decade low. The worries all center around inflation. There is unease that it won't be transitory, which for consumers could be self-fulfilling. A strong view is that now is not a good time to buy a house.</p><p>Equity markets are showing concern. While the overall S&P500 fall in September so far has been -2.0% market watchers are eyeing a larger decline than we had in September or October 2020. With the S&P500 futures indicating a -1.3% fall when Wall Street opens tomorrow, that would take the loss so far this month to -3.3% and something market watchers will take seriously, wondering what it signals.</p><p>North of the border, Canada goes to the polls tonight in a Federal election. Apparently it is too close to call according to most polls.</p><p>China's cent