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Gold hits record price as US Government Shuts Down

The dollar and U.S. stock market were inchoate on Wednesday as the U.S. shutdown its major operations. This delayed the release of important jobs data that could affect the outlook for interest rates. The U.S. data on private payrolls showed that employment in the U.S. fell by 32,000, contrary to expectations of a 50,000 increase. This added to fears that the U.S. labor market may be weakening.

The government shutdown has muddied the outlook this week. While weak employment numbers would normally add to bets for interest rate reductions that could support the equity markets, it is not uncommon to see such bets.

Due to the government shutdown, the Labor Department will not publish its more comprehensive and closely followed employment report for September on Friday. Investors said that this would make it difficult for the Federal Reserve to evaluate the U.S. economy as they weigh potential rate cuts.

Matthew Miskin is co-chief investment strategy at Manulife John Hancock Investments, Boston. "Not having any other data makes this difficult for the Fed."

The agencies said that there was no way out of the funding impasse, and the shutdown would result in the furloughing of 750,000 federal employees at a cost of $400,000,000 per day. S&P 500 recovered from earlier losses to gain 0.2% in the afternoon. Nasdaq Composite gained 0.3% and the Dow Jones Industrial Average remained flat. The MSCI All-World Index.MIWD00000PUS gained 0.3% thanks to moderate gains on Wall Street.

In the face of uncertainty, gold prices rose to $3,895 per ounce, a new record for a third consecutive session. Meanwhile, the 10-year Treasury yield, the standard, fell by 4 basis points, to 4.1116%. The STOXX Europe 600 index rose 1.2%, bucking the trend of the global market. It is now hovering near record highs. The FTSE 100 in Britain and the SMI in Switzerland outperformed. Healthcare stocks soared on expectations that they would avoid excessive U.S. tariffs following President Donald Trump's agreement with Pfizer regarding prescription drug prices.

In the STOXX 600, the healthcare sector is ranked third.

Lars Skovgaard is senior investment strategist for Danske Bank. He said: "There are a lot political risks in the healthcare industry, but once you see these risk diminish, investors will buy."

I think that this could support European shares in the next few days."

SLOW DOWN DATA

Investors may give greater weight to the ADP National Employment Report if Friday's nonfarm payrolls data is not released.

George Lagarias is the chief economist of Forvis Mazars. He said: "The general notion is that these things will have a short term impact and not a longer-term effect, and markets are aware of this."

The lack of data means we will assume that the current trend will continue. If there's no sign of a strong recovery in the economy, the Fed is likely to continue its current course.

The futures market now indicates a 95% likelihood of a Fed rate reduction in October. This is up from 90% a day ago, and there's a 75% chance that another move will be made in December.

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

In a note, he stated that "an extended period in which the U.S. Bureau of Labor Statistics does not operate at full capacity could affect data collection for other reports and may impact the data quality." Japan's Nikkei fell 0.9% on Tuesday after a 11% rise in the previous quarter. South Korea's stocks rose by 0.9% to add to their 11.5% gains in the previous quarter. Data showed that exports in September rose at the highest rate in 14 months.

DOLLAR FALLS

The dollar index fell for the fourth consecutive day on foreign exchange markets. It was down last by 0.1% at 97.78.

The euro fell 0.1% at $1.1724 while the pound rose 0.2% to $1.3475. The dollar fell 0.5% to 147.16yen after a Bank of Japan report showed that confidence among large Japanese manufacturers had improved in the second quarter. This increased the likelihood of an interest rate increase as early as this month.

After two days of declines, oil prices dropped further as investors weighed up potential OPEC+ plans to increase output next month.

U.S. crude fell about 1% to $61.71 per barrel while Brent dropped 1% to $65.35.

(source: Reuters)