Stocks Rise, Bonds Fall as US Shutdown Nears End: Markets Wrap
(Bloomberg) — Stocks climbed, while bonds and the yen weakened, as hopes for a deal to end the longest US government shutdown lifted sentiment after a volatile week in which investors grappled with concerns over lofty AI valuations.
Contracts for the S&P 500 rose 0.5% and those for the Nasdaq 100 advanced 0.8% as Senate Republican leader John Thune said a deal was “coming together” as he planned a test vote Sunday on a narrow spending package that would end the 40-day government shutdown. A group of Senate Democrats is leaning toward voting to advance the package provided final details can be worked out.
Asian shares edged up with South Korea leading the gains. As risk mood improved, bonds fell across the curve with the yield on 10-year Treasuries rising more than two basis points to 4.12%. The yen, a traditional safe haven currency, fell 0.2% against the dollar.
Ending the shutdown would give investors greater clarity on key economic data such as jobs and inflation, helping to lift the fog around the Federal Reserve’s path on interest rates. While hopes for a deal may provide some relief, markets remain concerned after last week’s sharp selloff in technology shares reignited concerns about stretched valuations.
“The lack of data had increased uncertainty, especially with regard to further Fed cuts,” said Nick Twidale, chief market analyst at AT Global Markets in Sydney. “But the resumption of data should open the way for more certainty on cuts.”
Asian tech stocks were particularly vulnerable, having outperformed US peers this year on optimism around China’s AI advances. Adding to the caution is a dearth of fresh data to guide investors on the health of the US economy.
The record-breaking US government shutdown is nearing an end after a group of moderate Senate Democrats agreed to support a deal to reopen the government and fund some departments and agencies for the next year, people familiar with the talks said.
The chamber is set to hold a procedural test vote on Sunday. If that vote succeeds, the Senate will need the consent of all members to end the shutdown quickly. Any one senator can force days of delay and votes. The House would then need to pass the bill for the government to reopen and Speaker Mike Johnson has said he will give lawmakers two days’ notice to return.
“Treasuries are down, risk-on proxies like the Aussie dollar are up and these are likely reflecting some hopes of a re-opening of the US government,” said Christopher Wong, currency strategist at Oversea-Chinese Banking Corp. in Singapore.
What Bloomberg strategists say…
US equity-index futures are treading water, highlighting the potential that even an agreement by the upper house of Congress won’t ensure the impasse is over. Investors may be unwilling to pile in too hard to equities unless they see a clearer consensus.
— Garfield Reynolds, MLIV Team Leader. For full analysis, click here.
Chinese assets will be in focus on Monday after consumer prices unexpectedly rose 0.2% in October from a year earlier, as holidays during the month boosted travel, food and transport demand. Factory-gate deflation also eased.
The S&P 500 rose 0.1% on Friday, rebounding from an earlier test of its 50-day moving average after a reading of US consumer sentiment fell to a more than three-year low. A gauge of the dollar edged up 0.1% in early Monday trading.
The greenback is likely to trade in a range for the time being, Commonwealth Bank of Australia strategists led by Joseph Capurso wrote in a note to clients. “Even if the shutdown ends this week, it will take some time for data to be released again. Several FOMC members have signaled reluctance to cut interest rates further while important economic data is not being released.”
In commodities, gold edged higher as the market weighed a weakening US economy against progress on ending the government shutdown. Oil steadied as traders weighed concerns about a glut and fallout from US sanctions against Russia.
Corporate News:
Pfizer Inc. agreed to buy Metsera Inc. for up to $10 billion, prevailing over Novo Nordisk A/S in a tumultuous bidding war after US regulatory opposition thwarted the Danish drugmaker’s rival bid for the obesity drug startup. Nvidia Corp. Chief Executive Officer Jensen Huang said he had asked Taiwan Semiconductor Manufacturing Co. for more chip supplies as artificial intelligence demand remains strong. Visa Inc. and Mastercard Inc. are close to a new agreement that will attempt to settle a two-decade legal spat with merchants, according to a person with direct knowledge of the matter. Olympus Corp. shares soared the most since November 2019 after the Japanese medical device maker unveiled plans to cut jobs and streamline operations. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.5% as of 10:02 a.m. Tokyo time Japan’s Topix rose 0.2% Australia’s S&P/ASX 200 rose 0.3% Euro Stoxx 50 futures rose 1.3% Currencies
The Bloomberg Dollar Spot Index was little changed The euro fell 0.2% to $1.1548 The Japanese yen fell 0.3% to 153.93 per dollar The offshore yuan was little changed at 7.1239 per dollar Cryptocurrencies
Bitcoin rose 1.9% to $106,456.79 Ether rose 1.8% to $3,646.7 Bonds
The yield on 10-year Treasuries advanced three basis points to 4.13% Japan’s 10-year yield advanced one basis point to 1.690% Australia’s 10-year yield advanced four basis points to 4.39% Commodities
West Texas Intermediate crude rose 0.7% to $60.17 a barrel Spot gold rose 0.5% to $4,019.44 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu, Matthew Burgess and Ruth Carson.
(An earlier version corrected index levels in the second paragraph.)
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