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Darkness descends on the US job market

Kevin Buckland gives us a look at what the future holds for European and global markets.

Investors knew that the U.S. labor market was in need of support. But the miserable ADP Employment Report, released to the market at the same time as the shutdown of the federal government, is particularly alarming.

ADP reported that payrolls fell by 32,000, compared to the economists' expectations of a rise of 50,000 for September. The 54,000 increase for August has been revised down to a slight decline.

For the moment, traders are adopting a narrative that "bad news is a good news", and adding bets on quarter-point rates cuts at all of the remaining Federal Reserve policy meetings in this year.

Wall Street was dominated by shares in the high-growth chip sector. This trend spread to Asia and boosted bourses across Asia from Tokyo to Taipei, Hong Kong to Seoul. European futures also point to a strong upward trend.

In Tokyo, the yields on short-term Treasury bonds fell further and reached a new two-week low. The dollar was also pinned to a low of one week compared with a basket containing its main rivals.

Gold has taken a well-deserved break after soaring to $3,900 overnight for the first ever time. However, it hasn't moved far from its previous price of around $3,866.

Analysts say that the length of the U.S. government shutdown could be crucial. There are still a few weeks until the Fed's October 29 rate decision, so there is plenty of time to bring employment data and other data online.

The deep partisan divides that led up to the shutdown could lead to a long-term battle and leave the Fed in a state of blindness.

If nothing miraculous happens, the Labor Department will not release the crucial monthly payroll data on Friday. The weekly Thursday jobless claim figures will also be affected by the Labor Department's inactivity. The private Challenger data on layoffs later today will receive much more attention.

Lorie Logan, the Dallas Fed's chief, is scheduled to appear.

In Europe, ECB vice-president Luis De Guindos, along with other policymakers such as ECB board members Patrick Montagner and Gabriel Makhlouf, the head of Ireland's central bank, and Riksbank governor Erik Thedeen are scheduled to speak at various forums.

The following are key developments that may influence the markets on Thursday.

Swiss CPI for September

- Euro-area unemployment rate (August)

- US Challenger layoffs (September)

No official data release due to US shutdown

(source: Reuters)