(Nov 12): Asian stocks were primed for a positive open after Wall Street was buoyed by optimism that the US government shutdown will soon end — restoring access to economic data that may clarify the Federal Reserve’s outlook.
Equity futures for Hong Kong and Australian benchmarks climbed while those for Japan were little changed. The S&P 500 erased earlier losses to close 0.2% higher, even as the tech-heavy Nasdaq 100 fell 0.3%. Nvidia Corp sank 3% as SoftBank Group Corp sold its entire stake in the chipmaker to help bankroll artificial-intelligence investments.
The record US shutdown may end as soon as Wednesday after the Senate passed a temporary funding bill, with economists bracing for a flood of delayed data once agencies reopen. Despite the disruption, the S&P 500 has gained around 2% since the shutdown began, outperforming the average during past shutdowns, CFRA data show.
“We are buyers of this dip and maintain our tactical bullish call,” says the JPMorgan Market Intelligence team led by Andrew Tyler. “The biggest near-term catalyst would be a reopening of the government which would buttress current-quarter GDP forecasts but also may release more liquidity into the market, which typically is supportive of stocks.”
With trading in cash Treasuries closed due to the Veterans Day holiday, futures on 10-year notes rallied and the dollar fell after private-sector employment figures from ADP Research signalled a slowing US jobs market. Money markets also added to bets on Fed rate cuts, pricing more than a 60% chance of a reduction next month. The yen stabilized around the 154 per dollar level after surging following the ADP release.
Reopening the government now depends on the House, which plans to return to Washington to consider the spending package. It would keep most of the government open through Jan 30 and some agencies through Sept 30.
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If approved, the bill goes to President Donald Trump, who has already endorsed the legislation.
Back in 2013, which was the last shutdown to affect the jobs report, the government reopened on Oct 17, and the September jobs report was released five days later, noted Jim Reid at Deutsche Bank
“So based on that timeline, we could get the September jobs report pretty quickly, not least because the original release was meant to be on Oct 3, just a couple of days after the shutdown began,” he said. “Early next week is realistic.”
See also: Asian stocks erase gains as Chinese shares decline
The resumption of economic data releases could make the case for increased wagers on Fed rate cuts. Most economists surveyed by Bloomberg suggest that Fed officials will lower borrowing costs by a quarter-point at their Dec 9-10 meeting. But the central bank’s path remains foggy after Chair Jerome Powell last month said a cut is not a certainty, a sentiment since shared by others at the Fed.
“The collective commentary suggests a continued significant split within the Committee’s views, and the bar for a December rate cut has demonstrably risen,” Deutsche Bank economists including Amy Yang and Matthew Luzzetti wrote earlier this week.
While tech stocks fell Tuesday, earnings from big tech have provided a lot to like for the AI trade with investors now looking forward to hearing from the industry’s biggest bellwether — Nvidia. That will be the next key event for markets once the smoke clears on the US shutdown front.
The maker of graphics processing units used in AI computing is scheduled to report on Nov 19 and expectations are high — especially after chief executive officer Jensen Huang gave a strong outlook for growth at a recent event.
“Tech stocks are going to continue to determine the direction of the stock market going forward whether investors like it or not,” said Matt Maley at Miller Tabak.
Meanwhile, in commodities, oil climbed as signs of a softer crude market were countered by surging premiums for fuels like gasoline and diesel. Gold pared gains as traders weighed a possible end to the shutdown.
Uploaded by Isabelle Francis
