Today's Edition
NEW YORK/LONDON (Reuters)
MSCI's global equities index climbed on Monday while government bond yields rose on bets that the record-long US government shutdown will soon end and enable the resumption of official data releases that will provide clarity on the economy.
The US Senate moved forward on Sunday on a measure to end the shutdown, now in its 41st day, which has sidelined federal workers, delayed food aid, snarled air travel, and paused the release of government economic data. Earlier that day, White House economic adviser Kevin Hassett said in an interview that fourth-quarter gross domestic product could be negative if the shutdown continued.
If the Senate passes the bill, which would fund the government until January 30 and include a package of three full-year appropriations bills, it must then be approved by the House of Representatives and sent to President Donald Trump, a process that could take several days.
The S&P 500 closed slightly higher on Friday on signs of progress in Washington. It had declined earlier in the day following a report that US consumer sentiment slumped to a nearly 3-1/2-year low on worries about the economic fallout.
"There's an increased willingness to take on additional risk because there's a possibility the government could reopen some time this week," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "Right now it's a bit of a relief rally."
Pavlik said investors have been concerned by anecdotal evidence of "people staying home and not spending as much" and are anxious for the resumption of official economic reports for "hard evidence."
"We've had this void for so long that it felt like it was starting to really weigh on investors' minds and people were focusing more and more on valuations," he said.
As of 12:37 p.m. on Wall Street, the Dow Jones Industrial Average (DJI) rose 147.51 points, or 0.31%, to 47,134.61, the S&P 500 (SPX) rose 71.35 points, or 1.06%, to 6,800.15, and the Nasdaq Composite (IXIC) rose 405.28 points, or 1.76%, to 23,409.82.
MSCI's gauge of stocks across the globe rose 10.74 points, or 1.08%, to 1,002.06, while the pan-European (STOXX 600) index gained 1.42%.
While last week's non-government data stoked worries about a weakening US labour market, a slew of Federal Reserve officials reiterated their preference for going slow on further rate cuts. Traders are pricing in a roughly 63% probability that the central bank will cut rates by 25 basis points next month, according to CME Group's FedWatch tool.
Fed Governor Stephen Miran said Monday a 50 basis point rate cut would be appropriate for December, noting that inflation is falling while the unemployment rate is drifting higher. But St. Louis Federal Reserve President Alberto Musalem said that with inflation closer to 3% than the Fed's 2% goal, the economy resilient, financial conditions accommodative, and monetary policy close to neutral, the Fed should "tread with caution" on any further interest rate cuts.
US Treasury prices fell, driving yields up as investors favoured riskier assets on optimism about an end to the government shutdown.
The yield on benchmark US 10-year notes (US10YT=RR) rose 1.9 basis points to 4.112%, from 4.093% late on Friday, while the 30-year bond (US30YT=RR) yield rose 0.7 basis points to 4.7083%.
The 2-year note (US2YT=RR) yield, which typically moves in step with interest rate expectations for the Fed, rose 3.4 basis points to 3.591%, from 3.557%.
Risk-sensitive currencies, including the Australian dollar, rose, while safe havens dipped against the US currency, as risk sentiment was boosted by signs the US government is closer to reopening.
The Australian dollar (AUD strengthened 0.55% versus the greenback to $0.6527, while against the Japanese yen, the dollar firmed 0.33% to 153.91.)
Safe-haven gold hit its highest level in two weeks as weak US economic data bolstered rate cut expectations and a softer dollar lent support.
Spot gold (XAU rose 2.42% to $ 4,095.42 an ounce. US gold futures (GCc1) rose 2.39% to $ 4,095.00 an ounce.
Oil prices edged higher as investors assessed moves to reopen the US government and oversupply concerns in the crude market.
US crude rose 0.05% to $ 59.78 a barrel, and Brent rose to $ 63.71 per barrel, up 0.13% on the day.
