Gains for U.S. stocks were accompanied by a decline in Treasuries as the White House expressed support for the bipartisan agreement to end the shutdown, a key development that makes it likely that the government will reopen within days. In addition, President Donald Trump has also floated the idea of paying $2,000 in tariff dividends to US citizens.The cross-asset moves indicated that investors were willing to return to riskier parts of the market following the recent selling of technology stocks, driven by concerns about high valuations. Many are betting that reopening the government will restore the flow of key economic data on jobs and inflation, bringing greater clarity to the Federal Reserve’s policy path.
“Reopening would not only boost sentiment but also pave the way for the release of data that could provide further insight into the health of the US labor market and, more broadly, the US economy ahead of next month’s Federal Reserve interest rate decision,” said Fiona Cincotta of City Index.
An emergency funding bill that would end the shutdown was on track to pass the Senate Monday night. Trump expressed support for the bipartisan deal on Monday. As investors piled into the riskier corners of the market, bonds fell. Government bonds also face a demand test in this week’s auctions totaling $125 billion. The bond market will be closed Tuesday for Veterans Day. Commodities also recovered, with aluminum rising alongside copper and other industrial metals. Aluminum, which hit a three-year high a week ago, has been one of the strongest performers on the London Metal Exchange in recent months, with investors weighing the impact of China’s capacity constraints at a time of resilient demand.
Meanwhile, a gauge of US-listed Chinese companies rose 2.3%. The American Depositary Receipts of Chinese electric vehicle manufacturer XPeng Inc. rose as much as 15%, to the highest intraday level since March. Taiwan Semiconductor Manufacturing Co.’s ADRs rose by 3.1%.
Elsewhere, Japanese Prime Minister Sanae Takaichi wants to use her first stimulus package to jump-start the economy and initiate a new growth strategy through investment in key industries.
Indian assets will also be in focus as Trump also indicated he would lower the tariff on Indian goods “at some point” and that the US was “pretty close” to a trade deal with New Delhi.
Back to the reopening of the US government, historical precedent from the 2013 shutdown suggests that September’s employment report could be among the first to go down the wire, possibly within three business days of reopening, according to Deutsche Bank’s Jim Reid.
Assuming the government reopens and the metrics start moving again, Fed officials will still be faced with data collected through retroactive surveys and other methods — if the numbers are released at all. And while several private sector reports on the labor market help fill the gap in official data, alternatives to government inflation figures are harder to come by and more limited in scope.
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