Global Stocks Rise as U.S. Shutdown Sparks Safe-Haven Demand and Fed Rate-Cut Bets

Global stock markets edged higher on Thursday as investors weighed the economic fallout from a potential U.S. government shutdown, while gold hovered near record levels amid growing uncertainty. Weak U.S. private employment data further intensified expectations for Federal Reserve interest rate cuts later this year, giving a boost to markets seeking safer assets. European shares reached new highs, and Asian tech stocks rallied, fueled by partnerships between South Korean chipmakers and OpenAI.

A prolonged U.S. government shutdown threatens to delay key economic data, including official employment and inflation reports, complicating the Fed’s decision-making on monetary policy. The spotlight fell on the ADP private payrolls report, which showed the U.S. economy unexpectedly lost jobs in September, a sign of slowing growth. Market analysts now see two quarter-point rate cuts by year-end as highly probable. “It’s like a blind man walking with a blind dog,” said Kevin Thozet, investment committee member at asset manager Carmignac, highlighting the uncertainty gripping investors.

The shutdown and weak economic signals have pressured the U.S. dollar, while boosting demand for traditional safe-haven assets. Gold briefly touched a record high of $3,895.09, and U.S. Treasury yields fell sharply, with the two-year yield dropping to a two-week low of 3.531%. Analysts say the combination of ongoing Fed easing bets and heightened geopolitical and economic risk is likely to sustain momentum in precious metals and government bonds.

Currency markets reflected the turmoil, with the dollar index near a one-week low of 97.459. The euro and British pound showed modest gains, while the yen stabilized after remarks from Bank of Japan Deputy Governor Shinichi Uchida suggested conditions for another rate hike are emerging. Meanwhile, oil prices ended a three-day decline as prospects of tighter sanctions on Russian crude offered support, with Brent crude rising to $65.48 a barrel and U.S. West Texas Intermediate crude climbing to $61.90.

Investors are now closely monitoring developments in Washington and key economic indicators for further clues on the U.S. economic trajectory. While equities remain supported by tech sector gains and rate-cut expectations, the uncertainty surrounding the government shutdown continues to weigh on market sentiment, reinforcing the appeal of safe-haven assets such as gold and Treasuries. As global markets navigate this precarious mix of risk and optimism, traders are bracing for volatility in the weeks ahead.

source: reuters