Stocks Surge as Dollar Declines and Gold Soars: Implications for Investors Amid Potential US Government Shutdown
Global Stock Markets Rise Amid Concerns Over U.S. Government Shutdown
Global stock markets experienced an uptick on Monday, as the dollar weakened in light of concerns regarding a potential shutdown of the U.S. government. This situation could delay the release of the September payrolls report and a series of other crucial economic data.
Gold prices surged to a new high, driven by the decline of the dollar and investor anxiety over the implications of a government shutdown. Later on Monday, President Donald Trump is scheduled to meet with leading Democratic and Republican congressional figures to discuss government funding. Without an agreement, a shutdown could commence on Wednesday, coinciding with the initiation of new U.S. tariffs on heavy trucks, patented medications, and various other goods.
A prolonged shutdown may impede the Federal Reserve’s ability to accurately assess the economy during its meeting on October 29. Analysts at Bank of America noted that if the shutdown continues past this meeting, the Fed will likely rely on private data for its decisions, which could marginally reduce the likelihood of an interest rate cut in October.
The MSCI All-World Index rose by 0.16%, while the STOXX 600 in Europe increased by 0.3%, aiming for a September gain of 1.1%, marking its third consecutive month of growth.
Market indicators suggest a 90% chance of a Fed rate cut in October, with approximately a 65% chance of another cut in December. Bank of America researchers estimated that a government shutdown would only trim economic growth by about 0.1 percentage points for each week it persists, emphasizing that past shutdowns had a minimal effect on financial markets.
However, they cautioned that if the government were to utilize the shutdown as an opportunity for permanent layoffs, this could significantly impact payrolls and consumer confidence. Additionally, uncertainty looms over a meeting involving U.S. military leaders in Quantico, Virginia, on Tuesday, which Trump is expected to attend, as called by Defense Secretary Pete Hegseth.
Historically Strong Q4 for Stocks
Analysts remain optimistic that buying activity for the new quarter may bolster equities, as the fourth quarter historically delivers positive returns for stocks, with the S&P 500 gaining 74% of the time during this period.
S&P 500 futures rose by 0.5%, while Nasdaq futures were up 0.6% after experiencing a slight decline last week. In the bond market, 10-year Treasuries found stability at 4.16%, having faced pressure the previous week following encouraging U.S. economic data that led to a decrease in expectations regarding future Fed rate cuts.
This week features several central bank officials, with at least five members from both the Federal Reserve and the European Central Bank scheduled to speak on Monday. The Reserve Bank of Australia will hold a meeting on Tuesday, with expectations that it will maintain its rate at 3.65% following three reductions earlier this year.
The U.S. dollar index dipped by 0.2% to 97.952 after benefiting from recent positive economic developments. MUFG strategist Lee Hardman stated that their forecast for the U.S. dollar’s continued weakening towards the year-end is based on the expectation that the Fed will implement two more 25-basis point rate cuts before the year’s conclusion, as the labor market remains weak.
The euro advanced by 0.1% to $1.1709, although it remained within the lower half of its recent range. The dollar also fell 0.6% to 148.61 yen, following a rally of over 1% last week that pulled it away from a September low of approximately 145.50.
In commodities, gold prices resumed their ascent, reaching an all-time high of $3,819 per ounce. Conversely, oil prices fell as crude began flowing through a pipeline from the semi-autonomous Kurdistan region in northern Iraq to Turkey for the first time in two and a half years. Reports indicate that OPEC+ is likely to approve another increase in oil production of at least 137,000 barrels per day at its upcoming meeting on Sunday.
Brent crude oil declined by 1.13% to $69.34 per barrel, while U.S. crude dropped by 1.4% to $64.77 per barrel.
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The possible U.S. government shutdown introduces uncertainty for global investors, potentially impacting capital flows into Oman. Businesses should leverage the dip in the dollar to explore import opportunities and secure favorable pricing on foreign goods. Smart investors and entrepreneurs should closely monitor قیمت طلا and consider diversifying into commodities as a hedge against potential market volatility.
