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London Quick Take – 30 September – Stocks falter as US heads for government shutdown
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
Gold rose to a new all-time high, before slipping back this morning while the dollar handed back some of last week’s gains, with Treasury yields a bit lower. US stocks ignored the noise to move higher as Wall Street looks to close out an unusually strong September and a fifth month of gains. In Europe, the FTSE 100 trades a little lighter this morning after threatening its all-time high yesterday. The blue chips are on course for the best quarter since 2022.
Data today shows the UK economy grew a little extra than thought in the last year, but still revealed a sharp slowdown in the rate of growth in the second quarter of this year to +0.3%. And although very marginally better than first thought, GDP per capita remains utterly stagnant. Shop price inflation rose at its fastest pace in 18 months. Bank of England deputy governor Dave Ramsden warned that Britain’s jobs market had weakened, wage growth was normalising, and that this should support inflation coming down to target. Cable has pushed up a bit this morning but seems to be largely a dollar move. Gilts are in ok shape post-Reeves as she stuck to the prudent fiscal rules schtick.
Elsewhere, China’s manufacturing PMI rose to 49.8 in September from 49.4 but remained in contraction for a sixth month, the longest since 2019; non-manufacturing slipped to 50.0 from 50.3.
The Reserve Bank of Australia left its cash rate at 3.60% as expected, unanimous. Policymakers said the decline in underlying inflation has slowed.
Carnival shares fell 4% despite raising its annual profit forecast, citing robust demand for its cruises, higher prices and strong spending by passengers on board. Shares remain +17% YTD.
Key Points
- FTSE 100 slips as European equities turn lower into the last trading day of the quarter
- US government seems headed for a shutdown
- UK economy slowdown confirmed but 2024 was better than thought
The US seems to be heading for a government shutdown this week after a meeting between President Trump and senior Congressional leaders ended yesterday with no agreement. “I think we’re headed to a shutdown because the Democrats won’t do the right thing,” Vice President JD Vance said afterwards.
Markets tend to look through shutdowns, but it could be harder this time to ignore the consequences of tribalism. First of all, it would delay the release of this Friday’s nonfarm payrolls report. It would certainly therefore make the Fed’s job harder, and increase near-term uncertainty. It could also shave a few percentage points off GDP. And if it drags on for long eventually the stock market and bond market will notice. The threat of mass firings is a concern as it would mean longer-term damage to the economy. Stock markets tend to ignore shutdowns as they don't last long and have virtually no impact on corporate earnings, but I looked at how it could be different this time on Friday.
Markets tend to look through shutdowns, but it could be harder this time to ignore the consequences of tribalism. First of all, it would delay the release of this Friday’s nonfarm payrolls report. It would certainly therefore make the Fed’s job harder, and increase near-term uncertainty. It could also shave a few percentage points off GDP. And if it drags on for long eventually the stock market and bond market will notice. The threat of mass firings is a concern as it would mean longer-term damage to the economy. Stock markets tend to ignore shutdowns as they don't last long and have virtually no impact on corporate earnings, but I looked at how it could be different this time on Friday.
Gold rose to a new all-time high, before slipping back this morning while the dollar handed back some of last week’s gains, with Treasury yields a bit lower. US stocks ignored the noise to move higher as Wall Street looks to close out an unusually strong September and a fifth month of gains. In Europe, the FTSE 100 trades a little lighter this morning after threatening its all-time high yesterday. The blue chips are on course for the best quarter since 2022.
Data today shows the UK economy grew a little extra than thought in the last year, but still revealed a sharp slowdown in the rate of growth in the second quarter of this year to +0.3%. And although very marginally better than first thought, GDP per capita remains utterly stagnant. Shop price inflation rose at its fastest pace in 18 months. Bank of England deputy governor Dave Ramsden warned that Britain’s jobs market had weakened, wage growth was normalising, and that this should support inflation coming down to target. Cable has pushed up a bit this morning but seems to be largely a dollar move. Gilts are in ok shape post-Reeves as she stuck to the prudent fiscal rules schtick.
Elsewhere, China’s manufacturing PMI rose to 49.8 in September from 49.4 but remained in contraction for a sixth month, the longest since 2019; non-manufacturing slipped to 50.0 from 50.3.
The Reserve Bank of Australia left its cash rate at 3.60% as expected, unanimous. Policymakers said the decline in underlying inflation has slowed.
Carnival shares fell 4% despite raising its annual profit forecast, citing robust demand for its cruises, higher prices and strong spending by passengers on board. Shares remain +17% YTD.
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