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The animal spirit can't be stopped by the politics of Europe and the US

Ankur Banerjee gives us a look at what the future holds for European and global markets.

The U.S. government shutdown and political gridlock are not likely to end any time soon. Stocks and gold have still reached new record highs as investors focus on the Federal Reserve's rate-cutting path.

Markets are taking a more risky approach, despite the possibility of a prolonged shutdown.

Due to the shutdown, traders don't need to wait for Friday's U.S. employment report. However, manufacturing data across Europe could influence the markets and highlight the impact of tariffs.

We have said that for some time, but the data has only shown a limited impact. The latest data showed that U.S. manufacturing increased in September. However, new orders and employment remained low as factories struggled to cope with the impact of President Donald Trump's tariffs.

Europe may be in for more of the exact same. This may not deter stock markets, where the pan-European STOXX 600 finished Thursday at a new record high. Its yearly gains now total 12%. Futures point to another strong opening.

The rise in global stock prices is largely due to the AI mania that has been a constant and the increasing bets on the Fed cutting interest rates this year. Without government data, traders are turning to private reports which show a slowing labour market.

This has strengthened the belief that the Fed is going to lower rates again. Traders have priced in a rate cut for later this month.

As a result, gold prices have been soaring. The yellow metal is on track to finish the week with a profit for the seventh consecutive time, bringing the yearly gain up to a staggering 47%.

Investors will be watching for any new deals announced after Trump announced an agreement with Pfizer CEO Albert Bourla to reduce drug prices in exchange of relief from tariffs planned on imported pharmaceuticals.

Sources said that the Trump administration has been pursuing deals in up to 30 industries involving dozens companies considered critical to national and economic security.

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

Economic events: September PMIs in France, Germany, UK, and Euro zone

(source: Reuters)