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Gold hits record highs as US shutdown begins, stocks fall and stock prices decline

Wall Street futures fell, gold reached a record-high and Asian stocks wilted on Wednesday as the deadline for the U.S. Government shutdown passed. This is expected to delay release of important jobs data and cloud the interest rate outlook.

The government shutdown has no way out. Agencies warned that there was no clear solution. It would prevent the release of an employment report for September, which is closely watched. This would also lead to the furloughing of 750,000 federal employees at a cost of $400,000,000 per day.

S&P 500 and Nasdaq Futures both fell by 0.5%. Gold prices rose to $3,875 per ounce in the third consecutive session, reaching a new record high. European futures were largely unchanged.

Investors may give greater weight to the ADP National Employment Report, due later today. Forecasts predict a modest increase of 50,000 jobs in the private sector.

"Typically, a shut down is not important for the markets. The 2018-2019 shutdown lasted over a full month and actually led to a rise in Wall Street, according to Kyle Rodda.

Rodda said that the markets face two issues. The first is the delayed release of non-farm payroll data. He said that the other issue is that "U.S. president Trump has also threatened permanently to lay-off employees, which could turn this shutdown into a small labour market shock."

The Federal Reserve is now expected to cut rates in October by 96%, up from 90% a day ago, and there's a 74% chance that they will do so again in December.

Anthony Saglimbene is the chief market strategist for Ameriprise. He said that if shutdown continues, inflation reports from September could be affected by mid-October.

He said that a prolonged period in which the U.S. Bureau of Labor Statistics was not fully operational could impact data collection efforts and the quality of data for other reports.

The Nikkei 225 index of Japan fell over 1% on Wednesday after a 11% increase in the previous quarter. South Korean shares increased by 0.6% to add to the 11.5% gains in the previous quarter. Data showed that exports in September rose at their fastest rate in 14 months.

Taiwan's stocks gained 1.3%. The island's chief tariff negotiator stated on Wednesday that Taiwan would not accept a deal to have half of all semiconductor production take place in Washington.

Chinese markets are closed, including Hong Kong.

Overnight Wall Street closed the quarter in a positive way, with a higher closing price. The data showed that U.S. employment declined in August, while job openings were marginally higher. Consumer confidence also fell more than expected.

The dollar index on the foreign exchange market held steady at 97.84 after three consecutive days of losses. It was unchanged at 147.98, with little reaction to a Bank of Japan report showing that Japanese companies expect prices to increase by an average of 2.4% per year in the future, which is above the 2% central bank target.

Asia's Treasury yields remained stable. The benchmark 10-year Treasury yield in the U.S. was unchanged at 4,1561% after rising 1 basis point overnight.

After two days of declines, oil prices stabilized on Wednesday as investors weighed the possibility of OPEC+ plans to increase output next month with the shrinking U.S. inventories.

U.S. crude climbed 0.1% to $62.46 per barrel while Brent rose 0.2% to $66.16.

(source: Reuters)