By Dhara Ranasinghe and Gregor Stuart Hunter LONDON (Reuters) -World stocks rallied on Wednesday as the U.S. Congress looked set to end a federal shutdown, paving the way for an end to a data fog that has fuelled uncertainty over the U.S. economic outlook. The yen was also in the spotlight as its fall to […]
Business
US shutdown relief sends stocks higher, markets go on yen watch
Audio By Carbonatix
By Dhara Ranasinghe and Gregor Stuart Hunter
LONDON (Reuters) -World stocks rallied on Wednesday as the U.S. Congress looked set to end a federal shutdown, paving the way for an end to a data fog that has fuelled uncertainty over the U.S. economic outlook.
The yen was also in the spotlight as its fall to nine-month lows against the dollar prompted more comments from officials.
European stocks rose to a new record high in early trade, U.S. stock futures pointed to a positive open on Wall Street, while Japan’s blue-chip Nikkei and broader Asia equity markets rallied around 0.4%.
The Republican-controlled House of Representatives is due to vote later on Wednesday on a compromise that would restore funding to government agencies and end a shutdown that started on October 1. The Republican-controlled Senate approved the deal on Monday night.
“There was always a risk that if the shutdown continued, further growth would be impacted and so data would be hard to read,” said State Street’s head of macro strategy Michael Metcalfe.
“So, the fact that we’ve finally got through the shutdown means there is a relief that there isn’t going to be a significant shutdown-driven slowdown in growth.”
U.S. jobs numbers are perhaps the most keenly anticipated data that has not been released due to the shutdown, as investors weigh up whether the U.S. Federal Reserve will cut rates again in December.
Tuesday’s weekly jobs data from ADP showed private employers shed an average of 11,250 jobs a week in the four weeks ending on October 25.
Markets price in a roughly 64% probability of a 25-basis-point Fed cut in December.
“For the equity rally to extend the data needs to be soft enough to encourage the Fed to cut and not too soft to raise slowdown fears,” said Metcalfe.
Japan’s Topix rose over 1% to hit a new record high. SoftBank Group bucked the trend with a 3.5% decline, taking its month-to-date loss to around 19% after it said it had sold its entire stake in Nvidia on Tuesday.
Even after the recent fall, shares in Japan’s biggest tech sector investor have more than doubled this year.
YEN WATCH
And in currency markets, the yen hit nine-month lows at around 154.79 per dollar before recovering slightly after Japanese Finance Minister Satsuki Katayama said she would not deny that the negative aspects of the weak yen on the economy have become more pronounced than the positive ones.
It has fallen nearly 0.8% for the week thus far, bruised by the overall risk-on market sentiment on optimism over an imminent end to the U.S. shutdown, and as investors expect greater fiscal largesse under new Prime Minister Sanae Takaichi.
ING’s global head of markets Chris Turner said one factor thought to be keeping the dollar higher against the yen was direct investment into the United States.
“These potential flows have brought dollar/yen to psychological resistance at 155, where Japanese verbal intervention is picking up,” he said in a note.
“However, few will want to sell dollar/yen at 155, fearing that it could easily run to 160 in thinning year-end markets and that physical intervention to sell dollar/yen probably won’t come before that 160 level,” Turner said.
The dollar index, which measures the currency’s strength against other major currencies, was last 0.1% higher at 99.574, while the euro was steady at around $1.1582.
Sterling was a touch softer around $1.3124 while there was a slight underperformance in UK government bonds as politics came back into focus.
British health minister Wes Streeting denied he was plotting to bring down Keir Starmer, after allies of the prime minister briefed newspapers that they feared an attempted coup could come later this month after the budget.
Oil prices softened but held on to most of their gains from the previous session amid expectations that an end to the U.S. shutdown could boost demand in the world’s biggest oil consumer.
Brent crude futures <LCOc1> slipped 29 cents, or 0.3%, to around $65 a barrel after gaining 1.7% on Tuesday. U.S. West Texas Intermediate crude <CLc1> was down 0.4%, to $60.77 a barrel.
Gold was last 0.1% lower at $4,131. [GOL/]
(Reporting by Gregor Stuart Hunter in Singapore and Dhara Ranasinghe in London; Editing by Kim Coghill and Jane Merriman)