Singapore: Global financial markets saw a surge on Monday as investor sentiment brightened over the possibility of an end to the prolonged U.S. government shutdown. Equities across Asia, Europe, and U.S. futures gained momentum, reflecting cautious optimism that political gridlock in Washington may soon ease.
The U.S. Senate took a pivotal step on Sunday toward a vote on legislation to reopen the federal government, following positive signals from Senate Majority Leader John Thune regarding bipartisan negotiations. This development provided immediate support for markets, with Nasdaq futures climbing approximately 1.1% and S&P 500 futures rising 0.65%. In Asia, the MSCI Asia-Pacific ex Japan index gained 0.9%, while Japan’s Nikkei 225 advanced 1%, signaling regional confidence. China’s CSI 300 slipped slightly by 0.14%, whereas Hong Kong’s Hang Seng Index rose 0.6% as local investors absorbed mixed economic signals.
Market strategists, however, urged caution. Charu Chanana, chief investment strategist at Saxo, noted, “Markets may see short-term relief, but headline-driven volatility is likely to continue until there’s a clear resolution.” Even if the Senate passes the bill, the package must still clear the House of Representatives and receive presidential approval, a process that could extend over several days.
The shutdown’s economic impact has been tangible. Federal employees, from airport staff to law enforcement and military personnel, have faced unpaid wages. Limited government reporting has also constrained the Federal Reserve’s ability to monitor economic conditions accurately. White House economic adviser Kevin Hassett warned that the U.S. fourth-quarter GDP could face contraction if the impasse continues. Consumer sentiment data reflected these concerns, plunging to a near three-and-a-half-year low in early November amid uncertainty about the broader economic fallout.
Despite these risks, broader risk sentiment remained positive. European futures followed the U.S. trend, with EUROSTOXX 50 and DAX futures climbing nearly 1.4%, and FTSE futures up 0.8%. In the commodities and bond markets, U.S. Treasury yields edged higher, with the 10-year yield at 4.1278% and the two-year yield at 3.5886%. The U.S. dollar recovered modestly against major currencies, trading at 99.64 on the dollar index, while the euro slipped to $1.1558 and sterling to $1.3152.
Market watchers continue to monitor Federal Reserve guidance, with recent statements indicating a preference for cautious action rather than immediate rate cuts. Economists at ANZ noted that December rate moves will depend on incoming economic data and the balance of risks in the outlook, highlighting ongoing uncertainty in global financial conditions.
The renewed optimism, while welcomed by investors, remains tentative. The resolution of the U.S. shutdown and the trajectory of monetary policy will likely continue to drive headline-based volatility in global markets in the days ahead.