Wall Street higher, European stocks enjoy best week since April
US shutdown means no jobs report on Friday
Gold set for seventh straight weekly gain
Yen on pace for strongest week vs dollar since May
NEW YORK/LONDON, Oct 3 (Reuters) – World stocks were on course for a solid weekly gain and more record highs as the seemingly unstoppable rally in tech shares and expectations of lower U.S. interest rates helped offset U.S. government shutdown uncertainty.
Investors have mostly shrugged off the shutdown, the 15th since 1981, but on Friday it meant traders weren’t getting probably the single most-watched piece of market-moving economic data – monthly U.S. payrolls figures.
Wall Street didn’t seem bothered, with all three major stock indices hitting new record highs, pushing MSCI’s main 47-country index of world shares (.MIWD00000PUS), opens new tab up 0.5%, while Europe (.STOXX), opens new tab cruised towards its best week since April.
Still, with no resolution in sight for the U.S. shutdown, some analysts predicted that other U.S. economic releases might be delayed later this month.
“Given the lack of talk among leadership, the shutdown is more likely than not to extend through the end of next week,” TD Securities said in a note to clients. “We expect the release of jobless claims to remain sidelined, with the CPI (consumer inflation) and retail sales reports at risk the following week.”
The S&P 500 Index (.SPX), opens new tab climbed 0.4% after hitting an all-time high of 6,747.18 points, and the Nasdaq Composite (.IXIC), opens new tab rose 0.2%, pulling back a touch from a record peak of 22,925.43 points struck in early trade. The Dow Jones Industrial Average (.DJI), opens new tab also jumped to a record high of 47,000.10 points, and was up 0.9% by late morning.
Euro zone services sector PMIs had helped the euro tick up too as they accelerated to an eight-month high thanks to moderate growth in Germany, Italy and Spain, although France’s political turmoil continued to weigh there.
Christopher Hodge, U.S. economist at Natixis, said the lack of payrolls data in some ways bolstered the current view among forecasters that U.S. interest rates will be cut again this month.
“The baseline (of a rate cut) is the default in the absence of new information,” Hodge said, adding that the markets also had plenty of practice now in dealing with U.S. shutdowns.
“The only thing that could be different this time is that we are in an economic and policy cycle that is a lot more ambiguous.”
Benchmark government bond yields – the main driver of global borrowing costs – nudged higher in both the U.S. and the euro zone , although they dropped in the UK after poor PMI data there, and all were down for the week.
Markets are almost fully pricing in a 25-basis-point Fed rate cut this month and at least four cuts by the end of 2026.
World stocks have roared back to record high
A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 4, 2024. REUTERS/Andrew Kelly/File Photo Purchase Licensing Rights, opens new tab
GOING FOR GOLD
The overnight rise in MSCI’s main Asian share index (.MIAP00000PUS), opens new tab meant it closed with a 2.7% weekly gain and has now risen about 23% this year.
China and some other parts of Asia had been closed for a holiday, meaning trading was thinner than usual although Taiwan hit a record high (.TWII), opens new tab and Japan’s Nikkei (.N225), opens new tab jumped 1.5% ahead of the crucial weekend vote that will determine that country’s next prime minister.
Weiheng Chen, global investment strategist at J.P. Morgan Private Bank, said investors appear willing to give Washington time to resolve its disagreements, though a prolonged government shutdown might start to move markets.
“For now, investors remain more focused on the potential impacts of the Fed’s rate-cutting cycle, trade and immigration policy, economic data and corporate earnings,” Chen said.
With no government reports on the labor market to take cues from, investors have turned to alternative data from public and private sources and so far they point to a sluggish U.S. labor market.
The Institute for Supply Management (ISM), for example, said on Friday its non-manufacturing purchasing managers index (PMI) fell to 50 last month, the breakeven level, from 52.0 in August, as U.S. services sector activity stalled in September amid a sharp slowdown in new orders,
It has left the dollar under pressure and Friday’s moves saw (.DXY), opens new tab sag again when measured against a basket of other top currencies. It was also on course for its biggest weekly drop since August. /FRX
The Japanese yen has been the biggest beneficiary of that dip although it weakened to 147.44 per dollar on Friday after Bank of Japan Governor Kazuo Ueda left markets guessing on when it will next hike interest rates.
In commodities, oil prices recovered slightly on the day but were on course for their steepest weekly drop in over three months. Brent crude futures were at $64.72 a barrel as U.S. trading gathered pace while U.S. West Texas Intermediate crude was at $61.15 a barrel.
Precious metal gold , meanwhile, was up again and on course for its seventh straight week of gains at $3,876.69, after hitting a new record of $3,896 an ounce on Thursday.
It is viewed as a safe-haven asset during times of uncertainty and thrives on low interest rates. It has now surged 47% this year.
“As the U.S. dollar’s status as the global reserve currency is tested, gold is emerging as the pre-eminent safe haven, and we continue to view it as the ultimate diversifier,” said Greg Hirt, global CIO for multi-asset at AllianzGI.
Additional reporting by Ankur Banerjee in Singapore; Editing by Susan Fenton, Mark Heinrich and Nick Zieminski
Marc Jones is a senior global markets correspondent based in London with a focus on economics, central banks, policymakers, and crises. Previously he worked in Frankfurt covering the European Central Bank at the height of the euro zone turmoil, the UK companies desk during the initial phase of global financial crash. He started his Reuters career on the sports desk covering everything from soccer to cycling.
