Today’s Outlook:
• US MARKET: At the closing of market, the Dow Jones Industrial Average rose 0.2% to a closing record of 46,397.83. The S&P 500 index rose 0.4%, and the NASDAQ Composite added 0.3%. The Dow closed at a record high Tuesday, as investors shrugged off growing signs that the government was headed for a shutdown this week, which could delay the release of key labor data. The main averages on Wall Street remain near all-time highs and are on course for to register a positive September on bets that the Federal Reserve will continue to slash interest rates this year, coupled with soaring enthusiasm around artificial intelligence.
The U.S. government will enter a shutdown if Congress fails to extend funding beyond Tuesday. Vice President JD Vance told reporters on Monday this scenario appeared to be likely after talks between President Donald Trump and bipartisan leaders marked little progress. The current political impasse is centered around disagreements over healthcare spending and social welfare programs. While the Republicans do hold a 53-seat majority in the Senate, they still need 60 votes to advance a proposed spending bill. Shutdowns have historically had little impact on corporate earnings. But they still tend to disrupt economic activity. The last time the government was shut down was for a period of 35 days in late-2018 to early2019. The Congressional Budget Office estimated the shutdown reduced gross domestic product by about USD 11 billion.
A shutdown this week could delay the release of September’s nonfarm payrolls data, which is due on Friday, and widely followed as a guide to potential future Federal Reserve rate cuts.
Along with the uncertainty surrounding a possible government shutdown, investors are also having to cope with a new wave of trade-related headlines. Trump has set tariffs on the import of lumber, furniture, and kitchen fittings with the intent of promoting local production and reducing reliance on imports. In a proclamation on Monday, the president imposed a 10% tariff on imports of softwood lumber and timber, a 25% tariff on imports of kitchen cabinets and vanities, and a 25% tariff on upholstered wooden products. The tariffs will take effect from October 14, Trump said. The levies are based on the findings of a Commerce Department investigation into lumber and furniture imports, which Trump had ordered earlier this year
• EUROPEAN MARKET: The DAX index in Germany closed 0.6% higher, the CAC 40 in France gained 0.2% and the FTSE 100 in the U.K. rose 0.5%. European stocks gained ground on Tuesday despite investors initially fretting about the impact on global growth from the imposition of sweeping tariffs as a potential U.S. government shutdown looms.
German import prices decreased by 1.5% year on year in August, while Britain’s economy grew 0.3% in the April-to-June period of this year, the Office for National Statistics said on Tuesday, in line with the initial estimate but still a sharp slowdown from the 0.7% growth in the prior quarter.
•ASIAN MARKET: Most Asian stocks kept to a slim range on Tuesday following mixed business activity readings from the region’s biggest economy. China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose 0.2% and 0.4%, respectively, while Hong Kong’s Hang Seng index fell 0.2%. Local trading volumes were muted ahead of the week-long National Day holiday, which is set to begin from Wednesday.
Government purchasing managers index data showed manufacturing activity shrinking for a six consecutive month, while services activity growth also slowed. But private PMI readings painted a drastically different picture. RatingDog PMI data showed manufacturing activity expanding at its sharpest pace in six months, while service sector activity also clocked outsized growth. Government and private PMIs differ in their scope of companies and regions covered, with investors usually using both prints to gain a broader picture of the Chinese economy. But the sustained weakness in the government PMIs may elicit more stimulus measures and monetary easing from Beijing, with support from late-2024 stimulus seen petering out in recent months.
• COMMODITIES: Oil prices settled lower on Tuesday as investors braced for a supply surplus due to potential OPEC+ plans for a larger output hike next month and the resumption of oil exports from Iraq’s Kurdistan region via Turkey.
• INDONESIA: The JCI closed down -0.77% in the red at the 8,061.06 level. Keep an eye on banking stocks, especially if they start approaching oversold support areas, where current valuations look quite attractive for accumulation. For those seeking a more aggressive approach, monitor momentum and sector rotation, as well as conglomerate stocks and those with a strong prospective narrative. If a continued pullback occurs in gold-based commodity stocks, they could be considered as trading opportunities once signs of weakness appear
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