No payrolls, no problem as Wall Street extends run of highs

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By Marc Jones and Koh Gui Qing

NEW YORK/LONDON (Reuters) -World stocks were on course for a solid weekly gain and more record highs as the seemingly unstoppable rally in tech shares and expectations of lower U.S. interest rates helped to offset uncertainty surrounding the U.S. government shutdown.

News late in the day that Palestinian militant group Hamas would agree to some of the terms in U.S. President Donald Trump’s plan to end the war in Gaza helped strengthen the Israeli shekel. The group said it would release hostages while seeking further negotiations on more contentious issues such as disarmament, and the shekel rose 0.7% to 3.2912 per dollar, capping a 1.6% gain for the week.

Investors have mostly shrugged off the U.S. shutdown, the 15th since 1981, but on Friday it meant traders weren’t getting what is probably the single most-watched piece of market-moving economic data: monthly U.S. payrolls figures.

Wall Street did not seem bothered, with all three major stock indexes hitting record highs, pushing MSCI’s main 47-country index of world shares up 0.3%, while Europe cruised towards its best week since April. [.N][.EU]

Still, with no resolution in sight for the U.S. shutdown, some analysts predicted that other U.S. economic releases might be delayed later this month.

“Given the lack of talk among leadership, the shutdown is more likely than not to extend through the end of next week,” TD Securities said in a note to clients. “We expect the release of jobless claims to remain sidelined, with the CPI (consumer inflation) and retail sales reports at risk the following week.”

The S&P 500 Index finished flat after hitting an all-time high of 6,750.87 points, and the Nasdaq Composite fell 0.3%, pulling back a touch from a record peak of 22,925.43 points struck in early trade. The Dow Jones Industrial Average also jumped to a record high of 47,049.64 points, before retreating to finish 0.5% higher.

Euro zone services sector PMIs helped the euro to tick up, too, as they accelerated to an eight-month high owing to moderate growth in Germany, Italy and Spain, although France’s political turmoil continued to weigh them down.

Christopher Hodge, U.S. economist at Natixis, said the lack of payrolls data in some ways bolstered the current view among forecasters that U.S. interest rates will be cut again this month.

“The baseline (of a rate cut) is the default in the absence of new information,” Hodge said, adding that the markets also had plenty of practice dealing with U.S. shutdowns.

“The only thing that could be different this time is that we are in an economic and policy cycle that is a lot more ambiguous.”

Benchmark government bond yields – the main driver of global borrowing costs – nudged higher in both the U.S. and the euro zone, although they dropped in the UK after poor PMI data there, and all were down for the week.

Markets are almost fully pricing in a 25-basis-point Fed rate cut this month and at least four cuts by the end of 2026.

GOING FOR GOLD

The overnight rise in MSCI’s main Asian share index meant it closed with a 2.7% weekly gain and has now risen about 23% this year. 

China and some other parts of Asia had been closed for a holiday, meaning trading was thinner than usual, although Taiwan hit a record high and Japan’s Nikkei jumped 1.5% ahead of a crucial weekend vote that will determine that country’s next prime minister. [.T]

Weiheng Chen, global investment strategist at J.P. Morgan Private Bank, said investors appear willing to give Washington time to resolve its disagreements, although a prolonged government shutdown might start to move markets.

“For now, investors remain more focused on the potential impacts of the Fed’s rate-cutting cycle, trade and immigration policy, economic data, and corporate earnings,” Chen said.

With no government reports on the labor market to offer cues, investors have turned to alternative data from public and private sources and so far they point to a sluggish U.S. labor market.

The Institute for Supply Management, for example, said on Friday its non-manufacturing purchasing managers index fell to 50 last month, the breakeven level, from 52.0 in August, as U.S. services sector activity stalled in September amid a sharp slowdown in new orders.

That has left the dollar under pressure. It sagged again on Friday against a basket of other top currencies and was on course for its biggest weekly drop since August. [/FRX]

The Japanese yen has been a major beneficiary of that dip, although it weakened to 147.4 per dollar on Friday after Bank of Japan Governor Kazuo Ueda left markets guessing on when the central bank will next hike interest rates.

In commodities, oil prices recovered slightly on the day but were on course for their steepest weekly drop in more than three months. Brent crude futures were at $64.39 a barrel as U.S. trading gathered pace, while U.S. West Texas Intermediate crude was at $60.69 a barrel.

Gold, meanwhile, rose for a seventh straight week to $3,885.99 an ounce, after hitting a record of $3,896.49 an ounce on Thursday.

It is viewed as a safe-haven asset during times of uncertainty and thrives on low interest rates. It has surged 47% this year. [GOL/]

“As the U.S. dollar’s status as the global reserve currency is tested, gold is emerging as the pre-eminent safe haven, and we continue to view it as the ultimate diversifier,” said Greg Hirt, global CIO for multi-asset at AllianzGI.

(Additional reporting by Ankur Banerjee in Singapore; Editing by Edmund Klamann and Lisa Shumaker)