Asian shares experienced a mixed performance on Tuesday as investors cautiously navigated the looming threat of a U.S. government shutdown. Japan’s Nikkei 225 index fell nearly 0.3%, closing at 44,932.63. Meanwhile, China’s factory activity data for September missed expectations, indicating ongoing economic challenges due to persistent trade tensions with the United States, which are impacting exports. However, Hong Kong’s Hang Seng index managed a slight gain, closing up 0.3% at 26,694.10, while the Shanghai Composite index saw a modest increase of 0.5% to finish at 3,882.07.
In broader Asian markets, Australia’s S&P/ASX 200 dipped 0.2% to 8,847.00, and South Korea’s Kospi fell nearly 0.1% to 3,428.28. The U.S. federal government is approaching a crucial budget deadline that could trigger a shutdown. While previous shutdowns were relatively short-lived and had minor effects on the markets and economy, prolonged stalemates between Democratic and Republican lawmakers could disrupt the collection and dissemination of important economic data, including figures related to jobs and inflation. Observers have noted that this shutdown may carry higher stakes, with the White House potentially pushing for significant layoffs among federal workers.
Stephen Innes, managing partner at SPI Asset Management, noted that the shutdown narrative appears to be exhausted, yet continues to capture traders’ attention as the budget clock winds down. “It feels as though the market has already flogged the government shutdown story from every conceivable angle… yet the narrative refuses to die,” he remarked.
In the U.S., Wall Street closed positively on Monday, buoyed by a resurgence in technology stocks that recouped some of their prior losses. The S&P 500 gained 0.3% to finish at 6,661.21, while the Dow Jones Industrial Average inched up 0.1% to 46,316.07. The Nasdaq composite surged 0.5% to close at 22,591.15, with notable gains from major tech players. Amazon rebounded with a 1.1% increase following a steep 5.1% drop the previous week, and Microsoft rose 0.6% to recover part of its 1.2% decline, both contributing to the overall uplift of the S&P 500.
Investors are eagerly awaiting a jobs report due on Friday, indicating the number of positions created and lost last month. A balanced report is anticipated to support ongoing Federal Reserve interest rate cuts, as the Fed recently implemented its first cut of the year, with expectations for more towards the end of the year. These rate adjustments are critical to sustaining the stock market’s momentum since significant increases have primarily stemmed from anticipations of continued rate cuts. Strong employment numbers could deter further cuts, potentially leading to stock market downturns, while weak numbers might signal an impending recession that could depress stock prices.
In a notable market event, Electronic Arts’ stock rose 4.5% following confirmation of a $55 billion buyout, touted as the largest all-cash transaction to take a company private, at a valuation of $210 per share.
Commodity markets also reflected investor sentiment, with gold reaching a record-breaking price of over $3,850 per ounce, propelled by expectations of further interest rate cuts, inflation concerns, and global debt pressures. In energy markets, benchmark U.S. crude declined by 25 cents to $63.20 per barrel, while Brent crude fell by 39 cents to $67.58. The U.S. dollar weakened slightly against the Japanese yen, trading at 148.32, down from 148.60, and the euro appreciated to $1.1733 from $1.1727.
