London (AFP) – US stock markets edged lower and gold retreated from a record high on Tuesday as traders steeled themselves for a possible US government shutdown. Congressional leaders met President Donald Trump Monday to seek a breakthrough before a midnight Tuesday deadline, but top Senate Democrat Chuck Schumer told reporters afterwards that “large differences” remained. Vice President JD Vance accused the Democrats of putting “a gun to the American people’s head” with their funding demands, adding: “I think we’re headed to a shutdown because the Democrats won’t do the right thing.”
While shutdowns are not usually painful, markets remained cautious, analysts said. “Usually, markets ignore shutdowns — most last only a few days and investors seem to take a long-term view of the situation, and the short duration of most incidents has little impact on company profits,” said Neil Wilson, investor strategist at Saxo. However, Wilson warned: “It could be different this time. Deep political divisions could see this drag on. A longer shutdown could have serious consequences for stocks.” He pointed to the White House threatening mass firings while recent changes to economic policy added to uncertainty and raised the prospect of a potential recession.
In New York, the broad-based S&P 500 index and the tech-heavy Nasdaq fell in opening deals, though the losses were limited, while the Dow was flat. Paris was down while London and Frankfurt were up in afternoon deals. Asia’s major indexes closed mixed. Gold, a safe haven investment in times of uncertainty, reached yet another peak above $3,871 an ounce before falling later in the day. Speculation is growing that it could soon hit $4,000, having piled on almost 50 percent since the turn of the year. The dollar pared back gains.
“The longer-term case is still supportive of further increases in the gold price,” said Kathleen Brooks, research director at XTB trading platform. “Dollar weakness, rising inflation expectations and the prospect of Fed rate cuts are all driving this gold rally.” There are concerns that a shutdown could delay this week’s release of government statistics on the labour market, including non-farm payrolls, which could provide clues about the Federal Reserve’s next move on interest rates. Recent indicators have supported investor expectations that the US central bank will cut borrowing costs twice more this year after reducing them this month as the labour market softens.
“A delay to the release of the Non-Farm Payrolls report this week could trigger some volatility as this report was considered the last piece of the puzzle before the October Fed rate cut,” Brooks said. “However,” she added, “we do not think that it will derail a rate cut next month.” Among individual companies, Spotify shares fell three percent after co-founder Daniel Ek announced he would step down as CEO of the music streaming giant and hand day-to-day management to two lieutenants. Oil prices, meanwhile, dropped further on fears of a glut amid talk of OPEC+ hiking output again when officials meet on Sunday. Trump’s Gaza peace plan was also weighing on prices, analysts said.
– Key figures at around 1330 GMT –
New York – Dow: FLAT at 46,301.97 points
New York – S&P 500: DOWN 0.1 percent at 6,653.52
New York – Nasdaq: UP 0.2 percent at 22,548.50
London – FTSE 100: UP 0.4 at 9,337.94
Paris – CAC 40: DOWN 0.2 percent at 7,868.31
Frankfurt – DAX: UP 0.3 percent at 23,809.82
Tokyo – Nikkei 225: DOWN 0.3 percent at 44,932.63 (close)
Hong Kong – Hang Seng Index: UP 0.9 percent at 26,855.56 (close)
Shanghai – Composite: UP 0.5 percent at 3,882.78 (close)
Euro/dollar: UP at $1.1729 from $1.1725 on Monday
Pound/dollar: DOWN at $1.3426 from $1.3434
Dollar/yen: DOWN at 147.95 yen from 148.68 yen
Euro/pound: UP at 87.35 pence from 87.28 pence
Brent North Sea Crude: DOWN 1.3 percent at $66.20 per barrel
West Texas Intermediate: DOWN 1.3 percent at $62.63 per barrel
© 2024 AFP
