Equities rallied for a second day and gold hit another record Tuesday on growing Federal Reserve interest rate optimism, though traders were preparing for a possible US government shutdown that could affect the release of key economic data.
A string of closely watched indicators has recently supported investor expectations that the US central bank will lower borrowing costs twice more this year, having done so this month for the first time since December.
And this week has readings on the labour market lined up — on job openings, private hiring and non-farm payrolls — with forecasters predicting they will show the labour market continuing to slow, giving Fed officials room to loosen monetary policy.
However, there are concerns that the failure of Republicans and Democrats to agree to keep funding the government could mean some figures could be postponed.
Congressional leaders from both sides met President Trump Monday in a bid to find a breakthrough before a midnight Tuesday deadline, but top Senate Democrat Chuck Schumer told reporters afterwards that “large differences” remained.
Vice President JD Vance accused the Democrats of putting “a gun to the American people’s head” with their funding demands, adding that “I think we’re headed to a shutdown because the Democrats won’t do the right thing”.
While shutdowns are not usually painful, Neil Wilson at Saxo markets remained cautious.
“Usually, markets ignore shutdowns — most last only a few days and investors seem to take a long-term view of the situation, and the short duration of most incidents has little impact on company profits. The average length of shutdowns is eight days,” he wrote.
However, he warned: “It could be different this time.
“Deep political divisions could see this drag on. A longer shutdown could have serious consequences for stocks. In the 35-day shutdown of 2018-2019 the S&P 500 fell 14 percent.”
He also pointed to the White House threatening mass firings, extending a recent widespread federal cull, while recent changes to economic policy added to uncertainty and raised the prospect of a potential recession.
Still, stock markets rose again in Asia.
Hong Kong, Shanghai, Sydney, Taipei, Singapore, Manila and Wellington all climbed, though Tokyo, Jakarta and Seoul inched down.
The prospect of a shutdown and expectations for rate cuts helped push gold to yet another peak just shy of $3,852, with speculation whirling that it could soon hit $4,000, having piled on almost 50 percent since the turn of the year.
“In trading rooms, gold is no longer just a hedge; it’s become the star performer, the undisputed heavyweight,” said SPI Asset Management’s Stephen Innes.
“Every desk is watching because when gold is surging, it tends to reveal more about political and policy anxiety than about jewelry demand.”
In company news, the international spin-off of China’s biggest miner Zijin Mining Group rocketed higher on its Hong Kong debut.
Zijin Gold International surged as much as 66 percent in early trade, having raised more than $3 billion in an initial public offering that came as gold companies see healthy rallies on the back of increased demand for the precious metal.
Oil prices extended Monday’s three percent plunge on fears about a glut amid talk of OPEC+ hiking output again in November.
Tokyo – Nikkei 225: DOWN 0.1 percent at 45,023.48 (break)
Hong Kong – Hang Seng Index: UP 0.3 percent at 26,694.73
Shanghai – Composite: UP 0.3 percent at 3,874.54
Euro/dollar: DOWN at $1.1721 from $1.1725 on Monday
Pound/dollar: DOWN at $1.3428 from $1.3434
Dollar/yen: DOWN at 148.65 yen from 148.68 yen
Euro/pound: UP at 87.30 pence from 87.28 pence
West Texas Intermediate: DOWN 0.6 percent at $63.09 per barrel
Brent North Sea Crude: DOWN 0.5 percent at $67.62 per barrel
New York – Dow: UP 0.2 percent at 46,316.07 (close)
London – FTSE 100: UP 0.2 percent at 9,299.84 (close)
