US Government Shutdown Deal Boosts Markets; Equities Surge Now

UPDATE: US markets are experiencing a significant surge as hopes rise for an imminent end to the government shutdown that has persisted for over 40 days. Reports confirm that bipartisan lawmakers have reached a crucial deal, potentially restoring operations in the world’s largest economy and alleviating mounting investor fears.

Equities rallied sharply on Monday, November 13, 2023, following news from CNN and Fox News indicating that senators have agreed to a stopgap funding measure to extend government operations through January. The deal addresses critical issues such as health care subsidies and the reinstatement of federal employees dismissed by former President Donald Trump.

As the Thanksgiving holiday approaches, the government shutdown has already disrupted several services, causing alarm among investors. A recent survey by the University of Michigan highlighted a decline in consumer sentiment, raising concerns about the economic ramifications. Lawmakers are now poised for a procedural vote later today that could finalize the agreement.

“There is a growing sense of urgency to reach a compromise,” said Rodrigo Catril from the National Australia Bank. “The economic consequences are mounting: the Congressional Budget Office estimates the shutdown could shave 1.5 percentage points off quarterly GDP growth by mid-November.”

Investor optimism has driven equities higher across Asia. Major indices such as the Nikkei 225 in Tokyo and the Hang Seng Index in Hong Kong reported gains of 1.0 percent and 0.5 percent, respectively. The potential reopening of government functions would allow for the release of key economic data, including labor market statistics, which are pivotal for the Federal Reserve’s upcoming interest rate decisions.

Currently, traders are navigating the uncertain economic landscape using private data, with a report from Challenger, Gray & Christmas revealing that US layoffs reached the highest level in 22 years in October. This spike in layoffs has sparked discussions about the likelihood of another rate cut, although Federal Reserve officials remain focused on combatting stubborn inflation.

Market analysts are pricing in a 67 percent chance of a rate cut in December, but recent comments from non-voting Fed members suggest a higher threshold for additional easing. Chris Weston from Pepperstone remarked, “The next wave of Tier 1 data, once government operations resume, will be critical for December expectations.”

Despite the positive momentum in equities, sentiment has been tempered by concerns over stock valuations and skepticism regarding the massive investments pouring into artificial intelligence. As the markets react to these developments, the implications of the shutdown deal will be closely monitored by investors and policymakers alike.

Key market figures as of 02:30 GMT include:

• Tokyo – Nikkei 225: UP 1.0 percent at 50,766.89
• Hong Kong – Hang Seng Index: UP 0.5 percent at 26,372.47
• Shanghai – Composite: UP 0.1 percent at 4,000.02
• New York – Dow: UP 0.2 percent at 46,987.10 (close)
• London – FTSE 100: DOWN 0.6 percent at 9,682.57 (close)

As the situation unfolds, all eyes will be on the Senate’s procedural vote and the potential implications for the economy and global markets.