The key story from last week was the partial shutdown of US government. Now in it’s third day, the Senate was in session over the weekend and have proposed a short term fix which will extend government funding until 8th February; on the assurance that there will be a separate vote on legislations to protect child immigrants brought to the US. The Senate is likely to vote on this later today. There have been 18 government shutdowns in history, with the longest shutdown lasting 21 days. Historically, this has had little impact on markets and the latest S&P data is testament to this; the index has now passed it’s longest period without a 5% pull back since 1928.

Whilst the US faces uncertainties, the same cannot be said for Europe. In Germany, Merkel has moved a little closer towards forming a coalition with the SPD with delegates voting 56% in favourof pursuing formal talks. It is thought that talks could start as soon as today and, if negotiations run smoothly, could be complete by early February. Horst Seehofer, leader of the CSU party stated that a new government could be sworn in by the first half of March.

Looking forward to the week ahead, the Bank of Japan (BoJ) and the European Central Bank (ECB) meet on Tuesday and Thursday, respectively. We do not believe there will be any change to policy but reiterate how central banks continue to impact upon the investment landscape.