Global shares jump as investors eye potential end to US government shutdown

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By Rae Wee

SINGAPORE (Reuters) -Global shares rose on Monday on optimism that an end to the historic U.S. government shutdown was in sight, while yields rose and the dollar nursed losses from last week.

The U.S. Senate on Sunday moved forward on a measure aimed at reopening the federal government and ending a now 40-day shutdown that has sidelined federal workers, delayed food aid and snarled air travel.

In a procedural vote, senators advanced a House-passed bill that will be amended to fund the government until January 30 and include a package of three full-year appropriations bills.

The breakthrough helped push Nasdaq futures up 1.27% while S&P 500 futures rose 0.74%. EUROSTOXX 50 futures and DAX futures jumped about 1.5% each, while FTSE futures gained 0.85%.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1.36% and Japan’s Nikkei advanced 1.33%.

“A possible end to the longest running U.S. shutdown is a positive for markets. Our expectation is that the next step is for a House vote on Wednesday, with the government set to re-open this Friday,” said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.

If the Senate eventually passes the bill, the package must still be approved by the House of Representatives and sent to President Donald Trump for his signature, a process that could take several days.

The shutdown has taken a growing toll on the U.S. economy, with federal workers from airports to law enforcement and the military going unpaid while the central bank flies blind with limited government reporting of economic data.

White House economic adviser Kevin Hassett said in an interview that the nation’s fourth-quarter GDP could be negative if the shutdown dragged on. Data on Friday showed that U.S. consumer sentiment slumped to near a 3-1/2-year low in early November as households worried about the economic fallout.

“While a deal would be market-friendly by restoring confidence and liquidity, it doesn’t undo the growth dent from what’s now the longest shutdown in U.S. history,” said Charu Chanana, chief investment strategist at Saxo.

Still, overall risk sentiment remained upbeat on Monday.

In China, the CSI300 blue-chip index reversed early losses to last trade 0.3% higher, while Hong Kong’s Hang Seng Index rose 1.5%.

Data on Sunday showed China’s producer price deflation eased in October and consumer prices returned to positive territory, as the government steps up efforts to curb over-capacity and cut-throat competition among firms.

U.S. Treasury yields edged higher, with the benchmark 10-year yield up more than 4 basis points to 4.1355%. The two-year yield rose roughly 3.8 bps to 3.5949%. [US/]

In currencies, the dollar recovered some of its losses from last week, as investors assessed the outlook for the U.S. economy against a more hawkish Federal Reserve. [FRX/]

While recent data stoked worries about a weakening U.S. labour market, a slew of Fed officials last week reiterated their preference for going slow on further rate cuts.

Against the dollar, the euro was down 0.04% to $1.1561. Sterling fell 0.06% to $1.3157 while the dollar index steadied at 99.62.

Markets are currently pricing in a 63% chance that the Fed will cut rates in December.

“On balance, Fed talk last week was in favour of holding off on easing in December, though most speakers were regional Fed presidents who don’t vote,” said economists at ANZ in a note.

“For now, we see the 12-member voting panel of seven governors and five regional Fed presidents voting for a 25 bp rate cut, with both hawkish and dovish dissents occurring. We don’t see a rate cut as foregone conclusion yet and acknowledge the decision will depend on the incoming data and the balance of risks associated with the outlook.”

Against the yen, the dollar was up 0.33% to 153.96.

Bank of Japan policymakers saw a growing case to raise interest rates in the near term, with some calling for the need to ensure companies’ wage-hike momentum will be sustained, a summary of opinions at the October meeting showed on Monday.

In commodities, oil prices rose, with Brent crude futures up 0.83% to $64.15 per barrel, while U.S. crude gained 0.92% to $60.31. [O/R]

Spot gold was up 1.9% to $4,074.81 an ounce. [GOL/]

(Reporting by Rae Wee; Editing by Kim Coghill)