NEW YORK/LONDON (Reuters) -Global stocks gained and gold traded near record highs on Thursday as investors took in their stride the potential ramifications of a U.S. government shutdown, while a weak private U.S. labor market report bolstered bets for Federal Reserve rate cuts.
Investors have been largely sanguine about the shutdown’s impact on the markets and economy, helped by data of past shutdowns that showed limited fallouts. Morgan Stanley, for example, said U.S. share prices have risen an average 4.4% while real U.S. economic growth has expanded 2.2% during shutdowns in the past.
Instead, investors are focused on how much the Federal Reserve might lower interest rates this year, and whether the roaring U.S. stock market is due for a short-term pullback in the near future.
Nicholas Colas and Jessica Rabe, co-founders of DataTrek Research, said sector sub-indices for the S&P 500 index are showing a marked correlation with downside risks.
“Every other time they have done so since 2023, the S&P has declined by 5-18% in the following weeks,” Colas and Rabe said. “This is not an outright ‘sell’ signal, but history says to be selective here.”
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The S&P 500, which has risen 14% so far this year, was flat after briefly touching a record high of 6,731.94 points. The Nasdaq Composite gained 0.3% after also hitting an all-time high of 22,900.60 points, while the Dow Jones Industrial Average was also little changed.
A protracted U.S. government shutdown could mean that the release of key official data on employment and inflation is delayed or disrupted, clouding the picture on the health of the world’s biggest economy and the path for interest rates.
A monthly payrolls report seems unlikely now to be released on Friday, putting an ADP employment report that showed the economy unexpectedly shed jobs in September into sharper focus. Traders are now pricing in two quarter-point Fed rate cuts by the end of the year as almost a done deal.
“I hope they sort this out rapidly,” said Kevin Thozet, investment committee member at asset manager Carmignac, referring to the government shutdown, adding that inflation data was also due ahead of the Fed’s next meeting. “It’s like a blind man walking with a blind dog,” he said.
SHUTDOWN ANGST HURTS DOLLAR, BOOSTS GOLD
The MSCI’s broadest index of global stocks was up about 0.1% on Thursday, after European stocks hit another record high, up about 0.5%.
Tech shares in Asia had earlier rallied, helping drive up the region’s stock indexes, partly lifted by news that South Korean chip heavyweights Samsung and SK Hynix inked partnerships to supply OpenAI data centres.
Gold , which have been buoyed by a combination of Fed easing bets and some shutdown angst, took a breather and slipped 0.5% after reaching another all-time high of $3,895.09 overnight.
The two-year Treasury yield sank to a two-week low of 3.531% overnight, and was last at 3.5449%.
“As is often the case, fresh highs are likely to beget yet more fresh highs here, with momentum still firmly with the bulls, and the fundamental case for further upside in PMs (precious metals) a solid one too,” said Michael Brown, senior research strategist at Pepperstone.
The U.S. dollar index, which tracks the currency against six major peers, languished near a one-week low of 97.459 reached overnight. It last stood at 97.864, up 0.1% from Wednesday’s closing level.
The dollar was little changed against the yen at 147.165 yen, after Bank of Japan Deputy Governor Shinichi Uchida signalled confidence that conditions for another interest rate hike were falling into place in remarks at an industry event.
The euro dipped 0.1% to $1.1717, while sterling fell 0.3% at $1.3441.
Oil prices edged lower on Thursday, extending a run of declines into a fourth day due to concerns about oversupply in the market. [O/R]
Brent crude futures fell 1.8% to $64.18 a barrel, and U.S. West Texas Intermediate crude also dipped 1.9% to $60.6 a barrel.
(Reporting by Iain Withers in London and Kevin Buckland in TokyoEditing by Deepa Babington and Nick Zieminski)