Asian stock markets closed mostly higher on September 29, 2023, while the US dollar experienced a slight decline. Investors are preparing for a potential shutdown of the US government, which could delay important economic reports, including the September payrolls data. This uncertainty has led to gold prices soaring to new heights, reaching an all-time high of $3,819 per ounce, thanks to the weaker dollar.
President Donald Trump is scheduled to meet with top Democratic and Republican leaders in Congress later today to discuss extending government funding. Without an agreement, a government shutdown will commence on Wednesday, coinciding with the implementation of new US tariffs on heavy trucks, patented drugs, and various other goods. A prolonged shutdown could hinder the Federal Reserve’s ability to gauge the economy prior to its meeting on October 29. Analysts at Bank of America noted that if the shutdown extends beyond the Fed meeting, the central bank might have to rely on private data for policy decisions, which could marginally reduce the likelihood of a rate cut in October.
The MSCI All-World Index rose by 0.16 percent, while in Europe, the STOXX 600 increased by 0.3 percent, marking a potential gain of 1.1 percent for September, its third consecutive month of growth. In Asian markets, Japan’s Nikkei index was the exception, declining by 0.7 percent. In contrast, China’s markets advanced, with the Hang Seng index up 0.9 percent and the Shanghai Composite index also gaining 0.9 percent. Australia’s S&P/ASX 200 rose by 0.9 percent, while South Korea’s Kospi surged by 1.3 percent.
Market expectations indicate a 90 percent chance of a Federal Reserve rate cut in October, with a 65 percent probability of an additional cut in December. According to Bank of America analysts, a government shutdown could reduce economic growth by 0.1 percentage points for each week it lasts. They emphasized that the impact on financial markets has typically been limited. However, if the government uses the shutdown to permanently lay off workers, it could significantly affect payrolls and consumer confidence.
In the United States, uncertainties loom over a meeting of military leaders in Quantico, Virginia, called by Defense Secretary Pete Hegseth, which Trump is expected to attend. Analysts anticipate that equity markets will be buoyed by buying activity as the new quarter begins, a historically positive period for stocks. The S&P 500 has shown gains in 74 percent of previous fourth quarters. Futures for the S&P 500 increased by 0.5 percent, while Nasdaq futures rose by 0.6 percent after experiencing a slight dip last week.
In the bond market, 10-year Treasuries found support around 4.16 percent, a level influenced by last week’s strong US economic data that tempered expectations for future reductions in Fed rates. This week, multiple central bank officials are scheduled to speak, including at least five from both the Federal Reserve and the European Central Bank on Monday. The Reserve Bank of Australia is also set to meet on Tuesday, where it is widely expected to maintain rates at 3.65 percent, having already reduced them three times this year.
The US dollar index slipped 0.2 percent to 97.952, following a week of favorable economic updates. Analyst Lee Hardman from MUFG predicts further weakness for the dollar as the year progresses, assuming the Fed implements two additional 25-basis point cuts by year-end amidst a sluggish labor market. The euro gained 0.1 percent to $1.1709, remaining in the lower half of its recent trading range of $1.1646 to $1.1918. The dollar also fell 0.6 percent to 148.61 yen, retreating from a rally the previous week.
In commodity markets, gold continues to climb, reaching a new high. Conversely, oil prices decreased as crude oil began flowing through a pipeline from the Kurdistan region of northern Iraq to Turkey for the first time in two-and-a-half years. Reports indicate that OPEC+ is likely to approve an increase in oil production by at least 137,000 barrels per day at its upcoming meeting next Sunday. Brent crude fell 1.13 percent to $69.34 per barrel, while US crude dropped 1.4 percent to $64.77 per barrel, according to the latest data.
