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Gold hits record price as US Government Shuts Down

Wall Street futures dropped, gold reached a new record high, and the dollar weakened on Wednesday, as the U.S. Government shut down most of its operations. This could delay the release of important jobs data, which may muddy interest rate forecasts. The government shutdown is not expected to end soon, as there's no way out of the funding impasse. Furloughs of 750,000 federal employees at $400 million per day are also likely.

S&P 500 and Nasdaq Futures both fell by about 0.6% on Wednesday. Gold prices rose to $3,895 per ounce in a third consecutive session, reaching a new record. The STOXX pan-continental index rose 0.4%. The FTSE 100 in Britain and the SMI in Switzerland outperformed. Healthcare stocks boosted their performance, as they hoped to avoid high U.S. tariffs on imports following President Donald Trump's agreement with Pfizer regarding prescription drug prices.

SLOW DOWN TO Delay Data

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.

Lars Skovgaard is a senior investment strategist with Danske Bank. He said that the shutdown should not have a major impact on the markets.

"I wouldn’t rule it out that it could add some jitters, but you shouldn’t be concerned about it. We're not," Skovgaard added.

The Federal Reserve is now expected to cut rates by 95% in October. This is up from 90% a day ago. There's also a 75% 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 index of Japan fell 0.9% on Wednesday after a 11% increase in the previous quarter. South Korean shares increased by 0.9% to add to their 11.5% gains in the previous quarter. This was after data revealed that its exports had risen at the fastest rate in 14 months during September. Taiwan's stocks gained 0.6%. 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.

Hong Kong and all Chinese markets were closed on a public holiday.

DOLLAR FALLS

The dollar index fell for the fourth consecutive day on foreign exchange markets. It was down last by 0.2% at 97.59.

The euro increased by 0.2%, to $1.1756. Sterling was up by 0.2%, at $1.3474. The dollar fell 0.6% to 147.06 Japanese yen after a Bank of Japan report showed that confidence among large Japanese manufacturers had improved in the second quarter. This increased the likelihood of a rate hike this month.

The yields on the Treasuries were unchanged in European morning trading. The benchmark 10-year Treasury yield in the U.S. was unchanged at 4.156% after rising 1 basis point on Tuesday.

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

U.S. crude fell about 0.1% to $62.28 per barrel. Brent, however, was only 0.1% lower.

(source: Reuters)