Week Ahead: Let's Hope Churchill Was Wrong About Americans

As global financial markets head into a second week of a partial U.S. Government shutdown, with a debt default still a technical possibility, investors have to hope that Winston Churchill was wrong about Americans.

If Churchill was correct, and Americans have to exhaust all the alternatives before they eventually do the right thing, markets are in big trouble

"We can always count on the Americans to do the right thing — after they have exhausted all the other possibilities," is a famous quote from the great British leader. Churchill's mother came from Brooklyn, New York, so he had some insight.

Well, the global securities markets really don't have the time for politicians in Washington to exhaust all the alternatives before reaching a budget deal to re-open Government and an agreement to raise the $16.7 trillion debt ceiling that would be breached around October 17.

Exhausting the alternatives could cause mayhem in the world's financial system. Global securities markets are so interconnected that they need Americans to do the right thing as soon as possible.

There were already signs at the weekend that Republicans were softening in their demands for a bargain, so let's trust that Churchill was ultimately wrong on this one.

This coming week brings the world's economic power brokers to the United States, with the International Monetary Fund and the World Bank holding their annual meetings in Washington.

The U.S. Government crisis is sure to be high on their agendas and any public statements they make on the global economy or the impact of the U.S. stalemate could move markets.

In Indonesia, the Asia-Pacific Economic Cooperation leaders will hold their annual summit and may have something to say about the U.S. crisis. Given that Asia-Pacific holds a large chunk of U.S. debt, it might not be nice.

Investors will also watch like hawks as the U.S. Treasury sets about selling roughly $64 billion in debt — bonds and notes — this coming week. Amid the jitters, will the demand for U.S. Government debt still be in the market?

So far, demand for U.S. debt has remained strong, but some pessimists fear that institutional and international investors may start at some stage to question the wisdom of lending savers' money to a Government that is $16.7 trillion in debt, can't keep its doors open and can't balance its books often enough.

Investors in U.S. stocks have all of the above to watch and then some big company news in the course of the week.

Alcoa Alcoa, JPMorgan Chase JPMorgan ChaseWells Fargo, Costco Wholesale, Family Dollar Stores and Yum! Brands will be among the first big companies to report quarterly earnings.

Hewlett-Packard will give an update on its turnaround business strategy on Wednesday.

The shutdown means that regular U.S. economic indicators and data reports may be delayed, meaning many investors are "flying blind" to some extent on the state of the economy as they make their bets.

U.S. economic data scheduled for the coming week include consumer credit figures on Monday, trade balance news on Tuesday, wholesale inventories on Wednesday and initial jobless claims on Thursday. On Friday, consumer sentiment news, retail sales numbers, producer price index updates, and business inventories are scheduled.