Stock markets worldwide climbed yesterday while safe-haven gold and Treasury bonds fell as investors largely shrugged off the first partial shutdown of the US government in 17 years on bets that it would be short-lived.
Congress missed a midnight deadline to agree on a spending bill, resulting in up to one million workers being put on unpaid leave.
Equities had fallen ahead of the shutdown, and some market participants view any pullback as a buying opportunity. Previous shutdowns haven’t had much of an impact on portfolios.
MSCI’s world equity index, which tracks shares in 45 countries, rose 0.5 per cent to 384.08; it has fallen 1.4 per cent since its recent high on September 19.
Europe’s broad FTSEurofirst 300 index gained 0.7 per cent to close at 1,255.97. The Dow Jones industrial average gained 59.53 points, or 0.39 per cent, to 15,189.20. The Standard & Poor’s 500 Index rose 12.87 points, or 0.77 per cent, to 1,694.42. The Nasdaq Composite Index added 39.22 points, or 1.04 per cent, to 3,810.70.
The benchmark 10-year US Treasury note fell 6/32 in price, yielding 2.635 per cent as traders reduced their safe-haven bond holdings after recent rallies.
Gold slid below $1,300 per ounce to its lowest level since early August, unwinding much of the gain built up before the shutdown. Spot gold fell to $1,288 an ounce from $1,326.94.
Fitch Ratings reiterated yesterday that a partial shutdown of the US government is not itself a trigger for downgrading its AAA sovereign credit rating, but it does undermine confidence in the budget process and raises concerns over whether the debt ceiling will be raised to meet US financial obligations.
If the debt ceiling is not raised in time, Fitch said a formal review of the AAA rating “with potentially negative implications” would be triggered, even though it believes US Treasury securities will be honoured in full and on time.
The dollar slipped on concern the shutdown would further delay the US Federal Reserve’s plans to start scaling back its monetary stimulus. The dollar fell to a near eight-month low against a basket of six currencies and hit a one-and-a-half-year low against the safe-haven Swiss franc.
Oil prices edged lower on concern that a shutdown of the US government will crimp demand, while easing tensions in US-Iran nuclear talks boosted prospects for an increase in supply. Brent crude fell 55 cents to $107.82 a barrel. US crude lost 33 cents to $102.