SYDNEY :Most share markets rose in Asia on Monday while the dollar eased as investors braced for a possible shutdown of the U.S. government, which would in turn delay publication of the September payrolls report and a raft of other key data.
President Donald Trump will meet with the top Democratic and Republican leaders in Congress later on Monday to discuss extending government funding. Without a deal a shutdown would begin from Wednesday, which is also when new U.S. tariffs on heavy trucks, patented drugs and other items go into effect.
A protracted closure could leave the Federal Reserve flying blind on the economy when it meets on October 29.
“If the shutdown lasts beyond the Fed meeting, the Fed will rely on private data for its policy decisions,” analysts at BofA wrote in a note. “On the margin, we think this may lower the likelihood of an October cut, but only marginally.”
Markets imply a 90 per cent chance of a Fed cut in October, with around a 65 per cent probability of another in December.
The BofA analysts estimated a shutdown would subtract only a slight 0.1 per centage point from economic growth for every week it lasted, while noting the impact on financial markets had been minimal in the past.
They cautioned that should the government use the closure to lay off workers permanently, then it could have a more meaningful impact on payrolls and consumer confidence.
There is also much uncertainty about what might happen at a meeting of U.S. generals and admirals in Quantico, Virginia, on Tuesday, called by Defense Secretary Pete Hegseth, which Trump will reportedly attend.
Q4 USUALLY GOOD FOR STOCKS
Otherwise, analysts expected equities to be supported by buying for the new quarter, which historically tends to be a positive one for stocks. The S&P 500 has gained 74 per cent of the time in fourth quarters.
S&P 500 futures gained 0.3 per cent, while Nasdaq futures firmed 0.4 per cent, having eased modestly last week. EUROSTOXX 50 futures added 0.4 per cent, as did FTSE futures and DAX futures.
Japan’s Nikkei slipped 0.8 per cent, but was still 5 per cent higher for September so far. Investors are waiting to see who will emerge as the new leader of the ruling LDP in a vote this weekend, with implications for fiscal and monetary policy.
South Korean stocks bounced 1.5 per cent, bringing their gains for the month to 7.8 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 0.4 per cent, to be up almost 4 per cent for the month.
Chinese blue chips added 0.7 per cent, ahead of the Golden Week holidays that begin on Wednesday.
In bond markets, 10-year Treasuries found support at 4.16 per cent, having been pressured last week by a run of upbeat U.S. economic data that led investors to pare back expectations for how low Fed rates might ultimately go.
A host of central bank speakers are on the diary this week, with at least five from both the Fed and the European Central Bank appearing on Monday alone.
Australia’s central bank meets on Tuesday and is widely expected to hold rates at 3.65 per cent, having already eased three times this year.
The dollar index slipped back 0.2 per cent to 97.952, having benefited last week from the batch of better economic news. The euro nudged up to $1.1726, but was still in the lower half of its recent $1.1646 to $1.1918 range.
The dollar eased 0.4 per cent to 148.89 yen, after rallying just over 1 per cent last week and away from the September low around 145.50.
In commodity markets, gold resumed its climb to reach a fresh all-time high at $3,808 an ounce.
Oil prices slipped as crude started to flow through a pipeline from the semi-autonomous Kurdistan region in northern Iraq to Turkey for the first time in 2-1/2 years.
Reuters reported OPEC+ will likely approve another oil production increase of at least 137,000 barrels per day at its meeting next Sunday.
Brent dropped 0.4 per cent to $69.84 a barrel, while U.S. crude eased 0.5 per cent to $65.37 per barrel.
