Stocks rise, dollar dips, gold surges as possible US government shutdown looms
German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 25, 2025. REUTERS/staff
NEW YORK/LONDON :Global stocks rose on Monday while the dollar retreated as investors prepared for a possible shutdown of the U.S. government, which could delay publication of the September payrolls report and a raft of other key data due this week.
Gold roared to a record high, powered by the dip in the dollar and by investor concerns about the possible ramifications of a U.S. government shutdown.
President Donald Trump will meet with top Democratic and Republican leaders in Congress later on Monday to discuss extending government funding. Without a deal, a shutdown would begin from Wednesday, the same day when new U.S. tariffs go into effect on heavy trucks, patented drugs and other items.
Investors, however, appeared sanguine about the risk of a U.S. government shutdown for now, which analysts attributed to memories of shallow declines in equity markets the last time the government shut down.
The S&P 500 added 0.3 per cent, the Nasdaq Composite Index rose 0.5 per cent, and the Dow Jones Industrial Average inched up 0.2 per cent.
That helped the MSCI All-World index to gain 0.4 per cent, while in Europe, the STOXX 600 rose 0.2 per cent, heading for a gain of 1.1 per cent in September that would mark its third straight month of increases.
"Over the last 30 years, the government has shut down only five times due to funding issues, the longest (34 days) was under Trump's first administration. In that event, the S&P 500 initially fell by 2.1 per cent and then recovered," said Nicole Inui, head of equity strategy, Americas, and Alastair Pinder, head of emerging markets and global equity strategist at HSBC Global Investment Research.
A protracted closure, however, could leave the Federal Reserve flying blind on the economy when it meets on October 29.
"If the shutdown lasts beyond the Fed meeting, the Fed will rely on private data for its policy decisions," analysts at BofA wrote in a note. "On the margin, we think this may lower the likelihood of an October cut, but only marginally."
Markets imply a 90 per cent chance of a Fed cut in October, with around a 65 per cent probability of another in December.
The BofA analysts estimated a shutdown would subtract only 0.1 per centage point from economic growth for every week it lasted, while noting the impact on financial markets had been minimal in the past.
They cautioned that, should the government use the closure to lay off workers permanently, then it could have a more meaningful impact on payrolls and consumer confidence.
There is also much uncertainty about what might happen at a meeting of U.S. generals and admirals in Quantico, Virginia, on Tuesday, called by Defense Secretary Pete Hegseth, which Trump will reportedly attend.
Q4 USUALLY GOOD FOR STOCKS
Otherwise, analysts expected equities to be supported by buying for the new quarter, which historically tends to be a positive one for stocks.
In bond markets, 10-year Treasury yields dipped, falling 4.6 basis points to 4.1406 per cent, having been pressured last week by a run of upbeat U.S. economic data that led investors to pare back expectations for how low Fed rates might ultimately go.
A host of central bank speakers are on the diary this week, with at least five from the Fed and the European Central Bank appearing on Monday alone.
The dollar index slipped 0.2 per cent to 97.945, having benefited last week from the batch of better economic news.
"Our forecast for the U.S. dollar to weaken further heading into year-end is built on the assumption the Fed will deliver two further 25-basis-point cuts by the end of this year as the labour market remains weak," MUFG strategist Lee Hardman said.
The euro rose 0.2 per cent to $1.17255 but was still in the lower half of its recent $1.1646 to $1.1918 range.
The dollar fell 0.6 per cent to 148.6 yen, after rallying just over 1 per cent last week and pulling away from the September low around 145.50.
In commodity markets, gold shot up to an all-time high at $3,833.37 an ounce, before retreating a touch to $3,828.17 to be up 1.8 per cent.
Oil prices fell as crude started to flow through a pipeline from the semi-autonomous Kurdistan region in northern Iraq to Turkey for the first time in 2-1/2 years.
Reuters reported OPEC+ will likely approve another oil production increase of at least 137,000 barrels per day at its meeting next Sunday.
Brent dropped 3.5 per cent to $67.68 a barrel, while U.S. crude fell 3.8 per cent to $63.21 per barrel.
(Additional reporting by Wayne Cole in Sydney; Editing by Shri Navaratnam, Jamie Freed and Edmund Klamann)
