Headlines:
Markets:
- JPY leads, CHF lags on the day
- European equities higher; S&P 500 futures down 0.5%
- US 10-year yields down 1.1 bps to 4.138%
- Gold up 0.5% to $3,878.87
- WTI crude oil down 0.5% to $62.05
- Bitcoin up 1.5% to $116,407
The standoff between the Republicans and Democrats continued and it finally led to the US government shutting down overnight. That now threatens key operational risks, with the potential for major US economic data releases to be delayed in the coming days/weeks.
For this week, the most important will be a delay to the US non-farm payrolls data on Friday. That looks imminent now as lawmakers continue to play a game of chicken in pushing their respective agendas.
The shutdown weighed on US futures mostly, with the relative uncertainty biting at market sentiment. For now, any economic risks should be contained but will be more concerning if the shutdown is prolonged. S&P 500 futures were down around 0.2% early on but fell to post declines of 0.8% before recovering a little bit of ground for now.
That led to European stocks holding lower at the open but investors soon turned their heads as regional stocks then rallied to post modest gains now to start October trading. That comes despite euro area inflation data is seen reaffirming the ECB view of pausing any rate cuts through to year-end.
In the FX space, the dollar was weighed down initially as well on the shutdown news. EUR/USD moved up to a high of 1.1778 before backing off to keep near flat levels now at 1.1733. Meanwhile, USD/JPY stumbled lower from 147.50 levels in the handover from Asia to test waters just under 147.00 – down 0.6% on the day.
Besides that, GBP/USD is seen up 0.3% to 1.3480 while AUD/USD is just marginally up by 0.1% to 0.6615 with large option expiries in play around 0.6600 for the latter. There wasn’t too much else going on as the moves are not too striking in the major currencies space.
In the bond market, Treasury yields were steadier for the most part but are now tilting slightly lower as we approach US trading. 10-year yields are down 1.1 bps to 4.138% after having held little changed near 4.15% for most of the session.
In other markets, gold continues to be a standout performer as it rose to a fresh record high of $3,895 before another slight round of profit-taking hit just before the $3,900 mark. The precious metal is seeing gains trimmed to just 0.5% now at $3,878 on the day.
All eyes will stay on the headlines from the US in the day ahead, in looking for any clues on how long the government shutdown might last. The impact of that towards the Fed decision at the end of the month is what market players will be worried about. But for now, calmer heads suggest that policymakers have enough to reaffirm market expectations and pricing of another 25 bps rate cut.
