US equity futures are heading into Day 3 of the US government shutdown on pace for what is now another daily all time high. S&P 500 and Nasdaq 100 futures rose 0.1% as of 8:15 am in New York, on course for the longest winning streak since July. Pre-market, Mag 7 are all higher led by TSLA (+1.6%), NVDA (+0.6%) and AMZN (+0.6%). European stocks enjoyed similar as the tech-fueled rally continues. Nikkei rose almost 2% after Japan’s Hitachi teamed up with OpenAI and Fujitsu, expanding its collaboration with Nvidia. Today's job report will become the latest casualty of the Democrats' government shutdown, and that’s actually helping to keep volatility subdued, according to ING strategists. Bond yields are mostly unchanged; USD is lower. Energy and precious metals are both higher. Gold was on track for a seventh weekly gain, fueled by central bank buying amid falling US interest rates and lingering inflation concerns. There’s also a view that the underlying labor market likely isn’t as weak as the ADP print estimated this week. There have not been much incremental updates overnight as investors are still waiting for updates from the White House. The only major data release we will receive will be ISM Services which is expected to print at 51.7 vs. 52.0 prior.
In premarket trading Mag 7 stocks are all higher (Tesla +1.2%, Meta +0.5%, Nvidia +0.4%, Amazon +0.4%, Alphabet +0.2%, Microsoft +0.1%, Apple +0.1%).
In corporate news, Boeing’s 777X is said to fly commercially for the first time in early 2027 instead of next year, a fresh setback to the US planemaker. A large blaze has broken out after an explosion at a Chevron refinery in Los Angeles County, according to CBS News. Tesla was sued over claims that defects in the doors of a crashed Cybertruck made it a “death trap.”
Investors are wagering that the billions pouring into the AI sector will translate into profits and extend gains in tech shares. So far none of that has happened. Meanwhile, the rally underscores how bullish momentum is overshadowing concerns about a US government shutdown, now in its third day and prompting a blackout in key economic data. In fact, it’s been 114 trading sessions since the S&P 500 had a 5% pullback, as US stocks take investors on a one-way ride up. Not surprisingly, Bloomberg Intelligence found that bears are becoming a vanishing breed, as bullish call option volumes posts new records and shorting has become increasingly dangerous in the meme-stock era. Global equity ETFs saw $152 billion of inflows in the past three weeks, the most on record, according to BofA strategists citing EPFR Global data.
“Financial market volatility is falling across the board, partly driven by the US government shutdown and the delay to key data releases such as the September jobs data,” wrote ING strategists Chris Turner and Francesco Pesole. “Instead, investors remain transfixed by the AI-driven rally in megacap tech shares, which shows no signs of slowing.”
One way to play the AI mania is to barbell valuation extremes using cheap cyclical assets against rich tech, according to BofA's Michael Hartnett. Fueling the excitement this week: Global Infrastructure Partners is in advanced talks to acquire Aligned Data Centers, while OpenAI continues to announce new partnerships. VC’s have poured $192.7 billion into AI startups so far this year, setting new global records according to PitchBook data.
The continued optimism around AI is stoking questions over how far the rally can run. Concerns are growing that valuations look overheated as spending has yet to translate into earnings.
“The market may well start asking questions whether current valuation levels are justified,” said Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin. “Further upside is set to be much more gradual, with risks of a setback fairly elevated.”
Even as investors remain transfixed by AI and the hype that surrounds it, they’re keeping one eye on the relentless rally in gold. Central banks around the world are accumulating the metal, while a gauge of gold mining stocks has significantly outperformed chip makers this year.
European stocks are on track for their strongest week since May, gaining for a sixth day in a row, driven by investor optimism over artificial intelligence developments. In individual stocks, Barry Callebaut shares jump after Bloomberg News revealed the Swiss company’s main shareholder previously explored taking the chocolate maker private. Stoxx 600 rises 0.4% to 569.9 with 461 members up, 128 down, and 11 unchanged. Here are the biggest movers Friday:
Earlier in the session, Asian stocks rose to head for a fifth consecutive session of gains, driven by technology shares on continued optimism over artificial intelligence. The MSCI Asia Pacific Index rose as much as 0.7%, taking its weekly advance to 2.7%. Japan was among the region’s top gainers ahead of the ruling party’s leadership election this weekend, while stocks slumped in Hong Kong. Markets were shut for holidays in mainland China and South Korea.
Heightened risk appetite fueled regional market gains Friday, with TSMC and Hitachi among the top contributors to the benchmark’s advance. Hitachi jumped 10% on a new strategic partnership with OpenAI while Fujitsu Ltd. expanded its collaboration with Nvidia. The day’s rally highlighted how global investors are largely brushing aside concerns about a potential bubble in tech shares. Meanwhile, Global Infrastructure Partners was in advanced talks to acquire Aligned Data Centers, a major beneficiary of the AI spending boom, in a deal that could value the company at about $40 billion. Hong Kong’s stock benchmarks slipped, taking a breather after recent gains. Most tech and EV shares were down, while Alibaba extended its rally.
In FX, dollar weakens against most of the G-10. The yen lags after BOJ Governor Kazuo Ueda avoided any clear hints on the rate path.
In rates, treasury yields are within a basis point of Thursday’s closing levels as US session gets under way, with government shutdown in its third day to postpone the release of September employment report. Yields kept to narrow ranges overnight, leaving 10-year near 4.08%; Gilts outperforming in Europe, with yields edging lower: UK 10-year is ~2bp richer vs US after weaker-than-expected UK services PMI. IG dollar issuance slate empty so far and expected to remain light; weekly total stands at $13.7 billion vs dealers’ projection of $25 billion. Services gauges from S&P Global and ISM are unaffected, however, and several Fed officials are slated to speak.
In commodities, oil prices bounced, though still set for a hefty weekly loss, Brent trading just below $65/barrel. Oil headed for its biggest weekly decline since late June, ahead of an OPEC+ meeting that’s expected to result in the return of more idled barrels. Gold slightly higher, up about $5 for the session and off records hit earlier in the week. Gold was on track for a seventh weekly gain, fueled by central bank buying amid falling US interest rates and lingering inflation concerns. And despite all the hype around AI and the surge in chip stocks this year, gold miners have actually been the better bet. An MSCI Inc. gauge of global gold equities has soared about 135% in 2025. It’s on course for its biggest-ever outperformance against the index compiler’s measure of major semiconductor firms, which is up 40%.
Looking at today's US economic calendar we get the September final S&P Global US services PMI (9:45am) and September ISM services (10am); September jobs report would normally land at 8:30am but it is being delayed. Fed speaker slate includes Goolsbee (8:30am), Miran (9:35am, 3:30pm), Logan (1:30pm) and Jefferson (1:40pm)
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APAC stocks were mostly firmer, taking their cue from Wall Street’s gains amid light newsflow, whilst the looming delay of the US jobs report due to the government shutdown keeps focus on Fed speak and upcoming ISM data. Mainland Chinese and South Korean markets remained closed for holidays. ASX 200 was supported by strength in technology and healthcare names, though gold miners lagged as the yellow metal pulled back. Nikkei 225 outperformed, driven by weakness in the yen and strength in technology, while remarks from BoJ Governor Ueda following this week’s Tankan Survey underlined the need to maintain an accommodative monetary environment, with focus also on the upcoming LDP elections. Hang Seng declined, bucking the regional trend as it failed to benefit from gains in technology, with Stock Connect closed and Mainland participants absent during Golden Week.
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European bourses (STOXX 600 +0.4%) opened slightly firmer and have traded sideways throughout the morning. No real moves to EZ Final PMI revisions. European sectors have opened slightly firmer with Banks (+1.0%), Basic Resources (+0.8%) and Retail (+0.6%) leading the way. The former benefits from upside in Raiffeisen Bank (+6.2%) after the FT reported that the EU is to lift sanctions on Deripaska to compensate the bank. Towards the bottom of the pile; Technology has been the worst performing sector, with losses broadbased; ASML (-0.8%) and BE Semiconductor (-2.4%) both on the backfoot. This pressure can be attributed to commentary via Applied Materials (-3.8% pre-market) which stated that the US BIS Affiliates Rule will cut Q4 revenue by about USD 110mln and reduce FY26 revenue by about USD 600mln.
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DB's Jim Reid concludes the overnight wrap
This week continues to see Europe and Asia outperforming the US, as fears about a prolonged government shutdown and some hawkish-leaning data meant sentiment in the US lagged again yesterday. However, a late rally led by Tech meant that the S&P 500 (+0.06%) just reached another record high, while the US 10yr Treasury (-1.5bps) fell back to 4.08%. But in Europe there was a more positive story again, with the STOXX 600 (+0.53%) up to a new record.
In terms of the US shutdown, yesterday brought no sign of an end to the impasse, with investors becoming increasingly concerned that it could drag on into next week. For instance, the Polymarket odds of the shutdown lasting beyond October 15 is currently at 45%, having stood at 34% as we went to press yesterday. So that added to concern about the shutdown having a larger economic impact, particularly given markets are lacking a lot of key data right now. Indeed, we’d normally be previewing the US payrolls number this morning, but the shutdown has seen that postponed, along with the usual weekly jobless claims yesterday.
In terms of progress on negotiations, Treasury Secretary Bessent called for a “clean continuing resolution” on federal spending in a CNBC interview, and warned that the shutdown could lead to a hit to US GDP and growth prospects. Those comments came as Trump posted on Truth Social that he would be meeting with his budget chief to determine which Democratic agencies he would decide to cut federal spending on, and whether these cuts would be temporary or permanent, potentially threatening "thousands" of jobs.
US Treasuries had spent the early part of the US day higher in yield, particularly at the front-end. One cause of that was an unusual release markets don’t normally pay much attention to, which was a payrolls estimate from Revelio Labs. That suggested nonfarm payrolls were up around +60k in September, which contrasted with the contractionary print (-32k) in the ADP’s report of private payrolls on Wednesday. That was also backed up by the Challenger job cut numbers, which found that job cuts in September were down -25.8% year-on-year. So that boosted optimism on the near-term US outlook, and meant investors pared back their expectations for rate cuts, now pricing in 91bps by the June meeting, down -1.0bps on the day. The 2yr yield spiked around 3bps on the data but ultimately settled barely higher (+0.4bps) at 3.539%, whilst the 10yr yield (-1.5bps) closed at 4.08%. Yields are back up just over a basis point overnight in Asia.
Back to the Fed, and we also heard a bit from Bessent on the Fed chair interviews, which he said were currently underway, and that he expected “3-to-5” candidates would be put forward for Trump’s consideration. Current Fed speakers continued to display a fairly balanced view. While the market wrestles with how to handicap the health of the US labour market without BLS data, Federal Reserve Bank of Chicago President Goolsbee said officials can turn to other sources. He noted that his staff had produced labor market data that “indicates some steadiness in the labor market and I think the underlying economy is still growing pretty solidly". Earlier in the day Federal Reserve Bank of Dallas President Logan said that she “has a little bit slower of a normalization of the policy path in order to make sure we get all the way to 2%.” She added that she felt labour market risks are “fairly balanced” and that “It doesn’t appear to be that policy is more than modestly restrictive.”
The S&P 500 (+0.06%) was able to shrug off shutdown jitters to creep to yet another record high. Things had looked even more promising at the open, before faltering following the employment data. Indeed, the S&P was pulled higher as the NASDAQ (+0.39%) managed to reach a new record, even as the Mag-7 underperformed that (+0.08%). Chipmaker stocks outperformed, with the Philadelphia Semiconductor index up +1.94% after yesterday’s overnight news that Samsung Electronics and SK Hynix have partnered with OpenAI as part of its Stargate AI push into data cloud centres.
In Europe, the mood was positive, and the STOXX 600 was up +0.53% to another record. We also saw multiple indices like the CAC 40 (+1.13%) and DAX (1.28%) jump over one per cent, although the UK’s FTSE 100 (-0.20%) lagged behind. That advance for the DAX comes as the multi-year German stimulus package is starting to come into effect, which is something I looked at in my chart of the day yesterday (link here). Meanwhile for bonds, yields on 10yr bunds (-1.3bps), OATs (-1.1bps) and BTPs (-0.6bps) all moved lower. 10yr Gilts (+1.4bps) underperformed as fiscal concerns persist and there was some intraday weakness after data from the Bank of England’s DMP survey which showed business inflation expectations were unchanged at 3.4%, albeit in-line with expectations.
In Asia, Japanese markets are leading the way, with the Nikkei soaring by +1.69%, nearing recent peaks, after a surprisingly dovish speech by BoJ Governor Ueda and ahead of a crucial ruling party vote that would determine the next Prime Minister of the country.
Ueda reaffirmed the bank's longstanding position on interest rates, thus avoiding signalling any policy changes for this month following recent market speculation about an imminent rate hike. Market pricing has dipped to 59% for an October hike down from 65%. The Yen has weakened around a third of a percent. Staying with Japan, the jobless rate increased to 2.6%, its highest level in over a year in August, from 2.3% the previous month, and against expectations of 2.4%. Additional data revealed that the job-to-applicant ratio decreased to 1.20 from 1.22, marking the lowest number of job openings since 2022.
In other markets, the S&P/ASX 200 is up by +0.37%, whereas the Hang Seng is down by -0.94%, impacted by losses in EV stocks following a decline in Tesla overnight. Trading volumes are subdued due to market holidays in China and South Korea, with Chinese markets remaining closed until the middle of next week. US equity futures are up a couple of tenths of a percent.
To the day ahead now, we’ll get UK September official reserves changes, France August industrial production, Italy September services PMI, August retail sales, Q2 deficit, and Eurozone August PPI. For central banks, we’ll hear from the Fed’s Williams and Jefferson, ECB President Lagarde, and the ECB’s Sleijpen, Villeroy and Schnabel, and BOE Governor Bailey.