US futures
Dow futures -0.25%, S&P futures -0.38% & Nasdaq futures -0.42%
In Europe
FTSE 0.56% & DAX 0.44%
- US stocks slip as the Government shuts down for the first time in 7 years
- ADP payrolls fall -32k vs 50k rise forecast
- Gold miners in focus as the precious metal hits fresh record highs
- Oil falls for a fourth day on OPEC+ supply worries
Nerves show as shutdown could delay data releases
US stocks are set to open lower amid a cautious mood following the U.S. federal government's official shutdown. This move risks delaying crucial economic data, which could leave the Fed operating without up-to-date data for its policy outlook.
Risk sentiment is taking a hit as investors show nerves in what could be a prolonged government shutdown, following the Republicans' and Democrats' failure to reach a last-minute agreement to fund the government.
Expectations of a dovish policy from the Federal Reserve have sustained the recent rally in stocks. However, without Friday's jobs report and potentially next week's CPI data, the data-dependent Fed may struggle with its next move after the central bank resumed rate cuts last month.
Historically, shutdowns have not derailed the markets; however, the current shutdown coincides with a critical junction for the Federal Reserve as the labour market eakens, inflation remains sticky, as well as elevated valuations and a fragile market.
ADP payroll data today showed that private payrolls fell by 32,000 in September, well below the expected 50,000 increase, and August was also downwardly revised to -3,000 from 54,000, highlighting weakness in the US jobs market.
USISM manufacturing PMIs are due out later today and are expected to show that activity contracted at a slower pace, with a reading of 49, up from 48.7.
Corporate news
Gold miners are in focus after the precious metal rose to fresh all-time highs near $3900 per oz. The precious metal is benefiting from the weaker dollar and the uncertainty caused by the congressional deadlock over spending.
Nike is rising after the sportswear giant posted stronger-than-expected Q1 results, suggesting its turnaround efforts are making progress despite weakness in China and tariffs squeezing margins. Nike reported revenue of $11.7 billion, ahead of forecasts of $11 billion, while net profit fell 31% to $727 million year-over-year, but it was still almost double the estimate. The sportswear company warned of a $1.5 billion loss due to US tariffs.
S&P 500 forecast – technical analysis
The S&P 500 remains within a rising channel that dates back to late April. The price is just off the record level of 6700 at 6660, as momentum slows, but no real signs of a reversal. Buyers will look to rise above 6700 to fresh record highs towards 6750 and 6800. Immediate support is seen at last week’s low of 6,570, and below that, the 50 SMA at 6,485. The September low sits at 6360.
FX markets – USD falls, GBP/USD rises
The USD is falling further as the US government officially shuts down and ADP payrolls fall, taking the USD to a weekly low. The move has unsettled the markets and could delay key jobs data on Friday, which is crucial for the Fed's rate decision.
EUR/USD is rising against a weaker U.S. dollar as eurozone inflation ticked higher. Inflation rose to 2.2% YoY in September, up from 2% in August, marking the first move above the ECB's target 2% level since April. The data support the view that the ECB will keep interest rates unchanged at 2% in this month's meeting.
The GBP/USD is rising, benefiting from the weaker U.S. dollar, despite UK manufacturing PMI showing the sector contracted again in September, falling to a five-month low due to weak demand.
Oil falls for a fourth day on OPEC+ supply worries
Oil prices are falling for a fourth consecutive day, as investors continue to weigh OPEC+ plans for increased oil production next month, while data from the US and Asia also show signs of cooling demand.
Oil prices fell by over 3% on Monday, the sharpest daily fall since the start of August, and continued to fall as the market anticipates that OPEC+ will increase output by up to 500,000 barrels per day next month. This would be triple the increase for October as Saudi Arabia seeks to reclaim its market share.
Separately, the API report showed that US crude stockpiles fell, while gasoline and distillate inventories rose in the week ending September 26th. EIA data is due today.
Furthermore, factory activity data from Asia, the world's largest oil-consuming region, added to concerns over fuel demand as manufacturing activity contracted across major economies in September.
