Today’s Outlook:
• US MARKET: Wall Street indexes appeared to be little deterred by the shutdown, with all three benchmarks rising for a fourth consecutive session. The S&P 500 closed at a record high of 6,711.20 points. The NASDAQ Composite rose 0.4% to 22,755.16 points, while the Dow Jones Industrial Average rose 0.1% to 46,411.10 points.
Investors bet on limited economic impact from an ongoing government shutdown. Weak labor and purchasing managers index readings also did little to deter Wall Street’s gains, amid sustained bets that the Federal Reserve will cut interest rates at the end of October.
U.S. government agencies began shutting down from early-Wednesday after Congress failed to approve fresh funding. Services ranging from air traffic control to disaster relief are expected to be disrupted, while key nonfarm payrolls data due on Friday is also expected to be delayed. It remained unclear just how long the shutdown will last, given that Democrats and Republicans in the Senate appeared no closer to reaching consensus on a spending bill. A Republican-backed spending bill was soundly rejected by the Democrats on disagreements over healthcare subsidies. President Donald Trump added to the divide by threatening to cut off funding for Democrat-leaning states and fire scores of federal workers permanently.
Shutdowns have historically had limited impact on financial markets and the economy. The last shutdown occurred during Trump’s first term– for a span of 35 days between late-2018 and early-2019– and was the longest in U.S. history. The shutdown cost the economy about USD 11 billion, the Congressional Budget Office estimated. With nonfarm payrolls data appearing to be likely delayed this week, investors looked to other readings on the labor market. ADP payrolls data read weaker than expected for September, indicating sustained weakness in the labor market. This trend could also be exacerbated by the shutdown furloughing government workers.
• EUROPEAN MARKET: European stocks rose on Wednesday, as investors digested the potential impact of the U.S. government shutdown and the release of key regional inflation data. The DAX index in Germany rose 1.1% and the CAC 40 in France gained 0.9%, while the FTSE 100 in the U.K. jumped 1.1%.
Consumer price inflation in the eurozone rose on an annual basis in September, but remained sufficiently close to the target for the European Central Bank. The consumer price index (CPI) rose by 2.2% annually last month, up from 2.0% in September, and in line with expectations. Month-on-month, the reading gained 0.1% last month after posting a similar gain of 0.1% in August. The European Central Bank kept interest rates on hold last month
•ASIAN MARKET: Most Asian stocks advanced on Wednesday, tracking overnight gains in Wall Street and as strength in technology shares offered support. Regional trading volumes were dulled by holidays in China and Hong Kong for the National Day. Mainland China markets will remain shut until the middle of next week. Indian markets stemmed recent losses after the Reserve Bank held interest rates as expected and forecast stronger economic growth this year.
Tech-heavy Asian bourses were the best performers on Wednesday, with South Korea’s KOSPI up 0.8%. Tech stocks tracked overnight gains in their U.S. peers, which were encouraged by lingering optimism over the artificial intelligence trade. An element of bargain buying also aided the sector, after it clocked steep losses through most of September.
But overall gains in tech were limited by growing uncertainty over the path of U.S. interest rates, after Dallas Federal Reserve President Lorie Logan flagged caution over more interest rate cuts.
• COMMODITIES: Oil prices slid for a third day in a row to a 16-week low on Wednesday as a U.S. government shutdown fed worries about the global economy, while traders expected more oil supply to come on the market with a planned output boost by OPEC+ next month. Brent crude futures fell 68 cents, or 1.0%, to settle at USD 65.35 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 59 cents, or 0.9%, to settle at USD 61.78. Those were the lowest closes for Brent since June 5 and for WTI since May 30.
• INDONESIA: The JCI closed lower, down -0.21% into the red at 8,043.8. Watch banking stocks, which are nearing oversold support areas with valuations appearing attractive for accumulation. For a more aggressive approach, monitor momentum and rotation into conglomerates and stocks with strong prospective narratives. If the pullback in gold-related commodity stocks continues, they may be considered for trading opportunities when signs of weakness emerge
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