US president Donald Trump. Photo: Reuters
Bloomberg
US stock futures and the dollar slipped as the first government shutdown in nearly seven years got underway, disrupting one of the nation’s biggest employers and threatening a blackout in economic data. Gold rose.
Contracts on the S&P 500 fell 0.4pc as traders reduced risk after the benchmark’s strongest September in 15 years. Nasdaq 100 futures retreated 0.5%, with tech stocks among the biggest decliners in premarket trading. Nike Inc. rose nearly 4% as its turnaround gained traction.
Gold neared $3,890 an ounce to sustain a record-breaking rally. The dollar extended its slide for a fourth day. Treasuries rose across the curve, with the 10-year yield falling two basis points to 4.13pc.
The US government shut down after a midnight funding deadline as President Donald Trump and Congressional Democrats clashed over health-care spending. With key economic reports on hold, traders fear the loss of visibility will leave markets in the dark on the outlook for monetary policy.
The immediate reports at risk are Thursday’s weekly jobless claims and the Oct. 3 release of September’s nonfarm payrolls. Wednesday’s private-sector payrolls data from ADP Research may therefore have added significance.
“Government shutdowns in the US are rarely market-moving in and of themselves, but the timing matters,” said Nina Stanojevic, investment specialist at St James’s Place. “This one comes at a point where the Fed is data dependent. The absence of clean data can increase volatility.”
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The Congressional Budget Office estimates that about 750,000 employees will be furloughed at a cost per day of $400 million in lost compensation. The Trump administration’s plan to fire federal workers outright could also drive jobless claims higher at a time when employment already looks fragile.
While the next Federal Reserve meeting is still four weeks away, policymakers might have to make decisions on an unclear picture, with the labor market softening and inflation hovering above target.
“In that case, a rate cut is likely to happen, but the uncertainty may lead to a change in expectations and increased volatility,” said Daniela Sabin Hathorn, senior market analyst at Capital.com.
Money markets are currently pricing in a 90pc chance of a quarter-point US rate cut this month, and almost a 70pc probability of another by year-end.
In Europe, the Stoxx 600 rose to within a whisker of its record closing-high. Drugmakers fueled the advanced after Pfizer won a reprieve from Trump’s long-threatened tariffs on the pharmaceutical industry.
(Bloomberg)
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