President Trump will meet Congress leaders to discuss extending government funding and avoid shutdown
Most share markets in Asia experienced an uptick on Monday, while the dollar softened as investors prepared for a potential shutdown of the U.S. government. Such a shutdown would delay the publication of the September payrolls report along with a host of other significant data.
President Donald Trump is scheduled to meet with top Democratic and Republican leaders in Congress later on Monday to discuss extending government funding. Without an agreement, a shutdown could commence on Wednesday, coinciding with the implementation of new U.S. tariffs on heavy trucks, patented drugs, and other items.
A prolonged shutdown could leave the Federal Reserve operating without crucial economic insights during its meeting on October 29. Markets are indicating a 90 percent likelihood of an interest rate cut by the Fed in October, with a roughly 65 percent probability of an additional cut in December.
Shutdown could cut growth by 0.1 percent weekly
Analysts at BofA estimated that a shutdown would reduce economic growth by only a slight 0.1 percentage point for each week it persists, although they noted that the impact on financial markets has been minimal historically.
They cautioned that if the government were to utilize the shutdown to make permanent layoffs, the repercussions could be more substantial on payrolls and consumer confidence. There is also considerable uncertainty surrounding a meeting of U.S. generals and admirals in Quantico, Virginia, scheduled for Tuesday at the request of Defense Secretary Pete Hegseth, which Trump is reportedly set to attend.
In other developments, analysts anticipate that equities will find support from buying activity for the new quarter, historically a favorable period for stocks. The S&P 500 has seen gains 74 percent of the time in the fourth quarters.
Read more: Asian stock markets rise as U.S. dollar falls on Fed rate cut expectations
Investors eye LDP leadership vote
S&P 500 futures rose by 0.3 percent, while Nasdaq futures strengthened by 0.4 percent, recovering slightly after a modest decline last week. EUROSTOXX 50 futures increased by 0.4 percent, as did both FTSE and DAX futures.
Japan’s Nikkei (.N225) dipped by 0.8 percent but remains up 5 percent for September thus far. Investors are keenly observing the upcoming vote this weekend for the new leader of the ruling LDP, which could impact fiscal and monetary policies.
South Korean stocks (.KS11) surged by 1.5 percent, resulting in a cumulative gain of 7.8 percent for the month. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose by 0.4 percent, showing an increase of nearly 4 percent for the month.
Chinese blue chips (.CSI300) climbed by 0.7 percent, ahead of the upcoming Golden Week holidays starting on Wednesday.
In bond markets, 10-year Treasuries found support at 4.16 percent, having faced pressure last week from a series of positive U.S. economic data, which prompted investors to adjust their expectations on how low Fed rates might ultimately go.
This week, several central bank speakers are scheduled to appear, with at least five representatives from both the Fed and the European Central Bank scheduled for Monday alone. Australia’s central bank will convene on Tuesday and is widely expected to maintain rates at 3.65 percent, having already eased three times this year.
Indian markets rise as energy stocks lead recovery
In India, equity benchmarks rose in early trading on Monday, led by energy stocks, following their most significant weekly decline in nearly seven months. The Nifty 50 (.NSEI) was up 0.43 percent at 24,761.5, while the BSE Sensex (.BSESN) added 0.39 percent to reach 80,745.23, as of 10:02 a.m. IST.
The indexes, which fell by 2.7 percent last week, have experienced losses in each of the preceding six sessions, driven by a hike in U.S. H-1B visa fees and steep tariffs on branded drugs, negatively affecting investor sentiment and exacerbating foreign outflows.
Investors are awaiting the Reserve Bank of India’s policy decision on Wednesday. On the day, fifteen of the sixteen major sectors saw gains. Energy (.NIFTYENR) and oil and gas (.NIFOILGAS) advanced by 1.2 percent and 1.5 percent, respectively, supported by oil marketing companies such as BPCL (BPCL.NS) and HPCL (HPCL.NS), following multiple brokerages’ assessments that stable fuel prices and an emphasis on improving market capitalization are positive indicators.
Oil India (OILI.NS) surged by 2.2 percent after reporting the discovery of natural gas in its exploratory well in the Andaman Shallow offshore blocks. The broader small-cap (.NIFSMCP100) and mid-cap (.NIFMDCP100) indices each increased by about 0.7 percent.
Conversely, the fast-moving consumer goods index (.NIFTYFMCG) declined by 0.3 percent, weighed down by a 1.5 percent drop in Hindustan Unilever (HLL.NS), which projected flat-to-low single-digit percent business growth for the current quarter due to temporary disruptions at distributors and retailers stemming from the government’s tax cuts.
