Sept. 6 - A new U.S. fiscal year starts in October and with it comes another round of spending cuts. Nomura Senior Political Analyst Alastair Newton on how the standoff between both sides will play out.
Okay. -- It's been rather strange period in the US. From a balance -- the mall match. Routes to roughly. The middle and -- long. Wet BF was never go mentioned by the F word on -- fiscal. Since the middle of July. Republicans and Democrats have begun. -- entrenched positions within -- two event coming up. In the fold the first is the expiry of the current government continuing resolution that ended September. And the second is. The expiry of extraordinary measures. Hate America. From people. And the need for increased the deficit. To dial back. -- six months ago. My. Worst case you know that feeling was of repetition you going hold its 2011. When we -- back. The politicians wouldn't like water -- that's. I think at that point. I think they will do with him maybe V continuing resolution will point out that maybe. They might even. And one of us tonight. But I don't think that this stage on the Republican to Democrat. It's been actually thinking America. Over the -- it's awesome that -- instance. And this is all about politics it's all about midterm elections in November 2000 -- thing if there's a risk to that. If is that. But two years ago. The Democrat President Obama. -- solidly winning the PR battle. Beating him for the Americans. Had a phonograph. What it's purposes. Something that we expect Obama was extremely successful November 2 years ago but also in the payroll tax. -- -- at the end of 2011. And the guy that. The end of 2012. However since then. The balance this long and somewhat to appeal -- the Republicans are now scoring points. The expense of the president. And that makes -- risk of something really. There's one other factor which markets need to. -- -- -- And that is all the the festival -- -- we've -- -- have a second round with the frustrations now market seems difficult without the -- frustrations happened on the first -- -- by what they did. And contrary to what President Obama is promising as a few weeks previously the world to know and first I think frustrations. Seem to have been at school without too much -- Economy -- point. The actual adjustment downwards to USC. You won't. I'm not necessary because that would be on math on this but if you -- behind the thoughtful report from the US published -- -- around about who can do. It takes that would be pessimistic outlook on the people start talking about over this thing to point out. Through this and perhaps being not so fewest GDP growth this year taking account of this second round of the frustrations another 85 billion split between. Defense expenditure and discretionary non defense expenditure. The impact of those six frustrations remains BC. But keep in mind this cool there's -- that's in the system to -- by definition then that -- through school the first round back in March secondly. These sequestration is going to be taking place in a somewhat different conflicts. Tapering will either have begun or be imminent if the Fed it to be taken his words and on the strength of that we've already seen. The US view to moving out with that Scania. Has gone a full percentage point to never ballots since late night putting more pressure on household as the -- sequestration for that and you could see things from consumer confidence which could -- -- division I. On the US economy. I'm not predicting. His -- -- -- any of these fiscal issues where I am saying is as with the euros. As with the Middle East and the big. As with Japan. As of economics comes to the crunch point all what is the narrow point that long and what is gonna happen consumption tax point -- -- Company or some of these kids. October in particular. There are plenty of reasons for markets. To focus back to an extent. On politics I think very -- about whether simultaneous combustion in these children these could actually cool some.