Wall Street investors shrugged off the ongoing US government shutdown to close the week on a positive note, setting the stage for Australian equities to potentially hit record territory. The S&P 500, the world’s most-watched benchmark, edged just 0.01% higher on Friday to post another all-time closing high. While the gain was marginal, it reinforced the index’s momentum in a period marked by political uncertainty and an absence of key government data.
The Dow Jones Industrial Average rose 0.5% as blue-chip stocks provided ballast, while the tech-heavy Nasdaq slipped 0.4% following a cooling-off in technology shares. On the local front, futures on the ASX 200 pointed to a 0.3% gain at the open. That rise could be enough to push the index 32 points higher, surpassing its previous closing record of 9091 set in August.
Global Market Overview
The week ended with mixed signals across global markets. In Europe, London’s FTSE climbed 0.7% and the Eurostoxx 50 added 0.2%, though Germany’s DAX fell 0.2%. Asia delivered stronger results, with China’s markets closing the week 2.0% higher and Australia advancing 2.3%. The Eurozone led with a 2.7% weekly gain, outpacing Wall Street’s 1.1% rise.
The lack of clarity from the US Bureau of Labor Statistics, which remains closed due to the shutdown, left investors relying on private-sector surveys. The Institute for Supply Management’s latest report indicated that the services employment index contracted for the fourth consecutive month. Though not definitive, this contraction reinforced expectations that the US Federal Reserve could move toward additional interest rate cuts to support the economy.
Commodities: Energy Down, Metals Up
Commodities delivered a contrasting picture. Oil markets slid further, with Brent crude down 1% on Friday and 7.4% for the week, closing at $65.40 per barrel. Analysts attribute the weakness to concerns over demand, particularly in Europe and Asia, where growth forecasts have been revised lower.
Metals, on the other hand, strengthened. Gold rose 0.8% to $3,886 per ounce, marking its seventh straight positive week. HSBC analysts project the metal could cross the $4,000 threshold soon, fueled by investor demand for safe-haven assets. Copper surged to a 16-month high, jumping 2.2% on Friday to $10,719 per tonne, making it the metal’s best week of the year.
Iron ore, central to Australia’s export economy, slipped marginally by 0.1% to $103.70 per tonne, reflecting subdued steel demand in China despite stimulus hopes.
Bitcoin and Digital Assets
Bitcoin continued its march toward uncharted highs. The cryptocurrency briefly topped $125,000 before retreating slightly to $122,766. This comes amid growing mainstream acceptance of digital assets, though volatility remains elevated. Analysts suggest institutional investors are a key driver of demand, as traditional markets face political and macroeconomic headwinds.
Investor Sentiment and Policy Uncertainty
Despite the shutdown, which has closed most US government agencies apart from Congress, markets appear focused on corporate performance and private data indicators rather than political dysfunction. The impasse in Washington has left hundreds of thousands of workers furloughed and critical data releases suspended, depriving investors of benchmarks that typically guide monetary policy expectations.
Edward Jones’ head of investment strategy, Mona Mahajan, told Reuters that “momentum is on the side of investors over the last few days,” noting the resilience of equity markets even as political negotiations stall.
The Senate remains divided over budgetary measures to end the shutdown, and there is little indication of imminent compromise. Meanwhile, lawmakers continue to receive full pay, a point of frustration for many American workers affected by the closure.
Australian Outlook
For Australia, the global backdrop presents both opportunities and risks. A 0.3% rise in ASX futures suggests investor confidence remains robust, supported by strong resource exports and resilient domestic spending. If the forecast gains materialize, the ASX 200 could eclipse its previous record close and set a new high.
The Australian dollar dipped 0.2% to 65.87 US cents, reflecting global risk sentiment and weaker commodity prices. A softer currency may provide a cushion for exporters but also raises concerns about imported inflation.
Analysts expect the Reserve Bank of Australia will remain cautious in its policy stance, balancing the risks of global slowdowns with domestic cost pressures. The market will also be watching closely for any signs of increased volatility should the US shutdown persist.
Key Numbers at a Glance
- ASX 200 Futures: +0.3% to 9,045 points
- Australian Dollar: -0.2% at 65.87 US cents
- Wall Street: S&P 500 flat, Dow +0.5%, Nasdaq -0.4%
- Europe: DAX -0.2%, FTSE +0.7%, Eurostoxx +0.2%
- Gold: +0.8% at $3,886/ounce
- Brent Crude: -1% at $65.40/barrel
- Iron Ore: -0.1% at $103.70/tonne
- Bitcoin: +0.7% at $122,766
The Road Ahead
Investors will need to navigate markets without the usual flow of government data, relying instead on corporate earnings, private surveys, and global commodity trends. While the US political deadlock introduces uncertainty, equity markets remain buoyed by liquidity expectations and relative optimism.
For Australia, today’s trading session may prove decisive in setting a new record for the ASX 200. Yet, with global energy prices weakening and geopolitical risks lingering, the sustainability of recent gains is far from assured.
Market participants should brace for volatility in the weeks ahead, particularly if the US shutdown drags on. A prolonged closure could undermine investor confidence and complicate central bank decision-making across the globe.
For now, the message from the markets is clear: despite political turbulence, investors are betting on growth, liquidity, and momentum. Whether that bet holds depends less on today’s numbers and more on tomorrow’s negotiations in Washington.
