U.S. stock index futures started Wednesday lower, with the S&P 500 down 0.4%, Nasdaq 100 off 0.5%, and Dow Jones slipping 0.4%, as the U.S. government entered a shutdown following the Senate’s failure to pass the Republican funding bill. The decline reflects investor caution amid a political crisis that threatens to disrupt the release of key economic data such as the nonfarm payrolls report.
The shutdown stems from a deep partisan divide over healthcare and insurance subsidies; Democrats demand additional aid, while Republicans insist on separating it from the funding bill. The continuation of this standoff increases the likelihood of a prolonged shutdown, adding pressure on market confidence and putting the economy in a sensitive position.
Despite these tensions, U.S. indices closed the third quarter with strong gains: the S&P 500 rose 7.8%, the Nasdaq gained 11.2%, and the Dow Jones advanced 5.2%. Momentum was driven by the technology sector and optimism surrounding artificial intelligence, reflecting a degree of resilience in the market. However, the ongoing shutdown remains a threat that could weaken confidence and further pressure risk appetite.
One of the most significant consequences expected is the delay in the nonfarm payrolls report, a critical indicator for the Federal Reserve’s policy direction. The absence of official data heightens uncertainty and weighs on the dollar, while boosting demand for gold and defensive havens.
The dollar remained near its weakest level in a week after the government shutdown raised fears of delayed jobs data. The dollar index steadied at 97.81 after touching 97.63, while the euro climbed to $1.1738, its highest level in a week. The dollar held at 147.92 against the yen after a string of losses. President Trump’s remarks threatening “irreversible measures” added to the pressure on the greenback.
The August JOLTS report showed a slight increase in job openings but a decline in hiring, confirming a slowdown in the labor market. With government statistical agencies halting data releases due to the shutdown, markets have become more reliant on private-sector indicators. At the same time, markets are pricing in a quarter-point rate cut at the October 29 meeting, with the probability nearing 95%.
In Japan, the Bank of Japan’s Tankan survey showed corporate sentiment improving for the second consecutive quarter alongside strong spending plans, prompting the central bank to adopt a more hawkish tone. Markets are now pricing in about a 40% chance of a rate hike on October 30. Any decision will largely depend on the bank’s outlook for the U.S. economy, making the USD/JPY a key focus in the coming period.
Stay informed about global markets through our previous analyses. and Now, you can also benefit from LDN company services via the LDN Global Markets trading platform.
