Indices hit records despite the US labor and government shutdowns

At the close on Wednesday, the Dow Jones (US30) rose by 0.09%. The S&P 500 (US500) gained 0.34%. The technology-heavy Nasdaq (US100) closed 0.42% higher. Wall Street indices closed at record highs on Wednesday, driven by strong sectoral performance and optimism that the US government shutdown would be short-lived. The ADP report showed a contraction of 32,000 private-sector jobs in September, signaling a slowing labor market, while activity at American factories continued to contract for the seventh straight month. Overall, strong performance in specific sectors, particularly healthcare, and confidence that the economic impact of the shutdown would be limited, helped lift US equities to record levels.

The ISM Manufacturing PMI for the US rose to 49.1 in September 2025, up from 48.7 in August, slightly exceeding market expectations of 49.0. The reading marked the seventh consecutive month of contraction. Survey respondents cited tariffs, high costs, and weak demand as key issues, with many halting capital projects, cutting spending, and facing delayed orders, particularly in the machinery, metals, and semiconductor sectors.

In Canada, the Manufacturing PMI fell to 47.7 in September 2025 from 48.3 in August, continuing to reflect a contraction in activity at Canadian firms. This was the eighth consecutive month of decline in manufacturing, impacted by a series of US tariffs on Canadian goods and retaliatory domestic duties. Looking ahead, companies continued to cite uncertainty about prospects due to policy changes and tariffs, with business confidence easing from August’s seven-month high and remaining significantly below trend.

European equity markets rose strongly on Wednesday. The German DAX (DE40) climbed 0.98%, the French CAC 40 (FR40) closed 0.90% higher, the Spanish IBEX35 (ES35) gained 0.41%, and the UK FTSE 100 (UK100) closed up 1.03%. European indices extended their rally, closing higher on Wednesday, boosted by healthcare stocks, which received investor support related to tariffs. Shares of Merck jumped 10.1%, Bayer added 5%, Fresenius Medical Care gained 1.4%, and Siemens Healthineers rose 0.6%. This followed a deal between Pfizer and the Trump administration allowing patients to access discounted prescription drugs through a new federal platform. Nevertheless, broad market sentiment remained volatile amid ongoing concerns about the US government shutdown. Regarding data, Eurozone inflation rose to 2.2% in September, matching expectations and underpinning the European Central Bank’s (ECB) cautious approach to further rate cuts.

Brent crude oil prices fell below 66 per barrel on Wednesday, hitting their lowest in over three weeks, extending a three-day slide as OPEC+ considers a faster supply increase. The group meets on Sunday to discuss increasing output by 500,000 barrels per day per month for three months, despite projections warning that the market is already oversupplied. The IEA expects a record surplus next year, and TotalEnergies notes market saturation in the first quarter. Still, traders are skeptical that the full OPEC+ production increase will materialize, given Saudi Arabia’s cautious stance on capacity constraints.

Asian markets declined yesterday. Japan’s Nikkei 225 (JP225) fell by 0.85%, China’s FTSE China A50 (CHA50) and Hong Kong’s Hang Seng (HK50) did not trade due to holidays, and the Australian ASX 200 (AU200) posted a negative result of 0.04%.

Australia’s trade surplus fell to 1.83 billion AUD in August 2025, the lowest reading since June 2018 and well below market expectations of 6.2 billion AUD, compared to a downwardly revised 6.61 billion AUD in July. The sharp drop was driven by exports falling to a three-month low, stemming from reduced shipments to the US following new tariffs and a sharp decline in gold exports. Meanwhile, imports rebounded to a record high after falling in July. On the policy front, the Reserve Bank of Australia kept its cash rate at 3.6% earlier this week, with Governor Bullock noting that while some CPI components were slightly higher than anticipated, inflation remains contained.