As the longest government shutdown in U.S. history continues to loom over households, the Senate took significant steps on Sunday to resume operations in Washington, invigorating both U.S. stock futures and global markets after a tumultuous week. The initial Senate proposal aims to fund the government only through January, yet it has spurred a notable increase in U.S. stock futures, which saw a rise of nearly 1% ahead of Monday’s market opening. Interest in Treasury long bonds surged, leading yields to reach their highest levels in over a month.
In a sign of renewed risk appetite, the dollar experienced a slight decline, while prices for commodities, including bitcoin, showed upward trends. Investors are now bracing for a flood of delayed economic data that could lead to significant market fluctuations in the coming weeks, although concerns remain that some reports may be incomplete due to ongoing data-collection issues. The VIX volatility index, a barometer of market anxiety, eased slightly, settling around 18.6.
The uncertain economic landscape poses challenges for the Federal Reserve, as futures markets are currently pricing in about a two-thirds likelihood of an interest rate cut in the next month. Although the Fed plans to halt its balance sheet reduction starting next month, thus providing some cushion for Treasury markets, they still face a busy week ahead, with approximately $58 billion in 3-year notes scheduled for auction on Monday.
Meanwhile, developments in Japan indicated a weakening of the yen after newly-appointed Prime Minister Sanae Takaichi announced ambitions for a more flexible fiscal policy over the coming years. This shift could dilute Japan’s commitment to fiscal discipline and adds pressure to the Bank of Japan, which is contemplating interest rate hikes in light of the upcoming monetary policy decision in December.
In China, stock markets saw gains following better-than-expected inflation data, with consumer price growth returning to positive territory and easing deflationary pressures. However, troubling signs emerged regarding domestic demand, as October car sales showed an unexpected decline, ending an eight-month growth streak. This downturn reflected weakened consumer sentiment, influenced by reduced tax exemptions and government giveaways.
The U.S. earnings season is beginning to wane, with a lighter slate of reports expected this week. In recent corporate news, a significant deal was struck in the pharmaceutical sector, as a major drugmaker finalized a $10 billion acquisition of obesity treatment developer Metsera amid fierce competition from rivals.
Eyeing the future, market analysts ponder how much clarity the upcoming data releases will bring, especially as the rise of artificial intelligence complicates the accurate measurement of economic activity.
Looking ahead to today’s events, key economic indicators include the sale of $58 billion in 3-year Treasury notes and earnings reports from companies such as Occidental Petroleum and Tyson Foods. Globally, Brazil will host the COP30 climate summit, where the feasibility of achieving a binding agreement remains uncertain amidst a backdrop of heated global politics.
In the world of media, significant leadership changes occurred at the BBC, with the resignation of its director-general and head of news following accusations of bias related to edits made to a speech by former U.S. President Donald Trump.
As the landscape continues to evolve, investors and governments alike will be closely monitoring these developments as they impact both domestic and international markets.
