Market risk-off sentiment intensifies!
As the US federal government enters a shutdown, financial markets face renewed turbulence. Today (October 1), US stock futures collectively plunged, with Nasdaq futures falling over 1% at one point. In pre-market trading, major tech stocks declined broadly, with Apple falling nearly 1%, while Nvidia and AMD both dropped over 1%.
Japanese markets also experienced significant adjustments on the day. At market close, the Nikkei 225 index fell 0.85%. Financial stocks mostly declined, with Mizuho Financial Group dropping nearly 4%, while Mitsubishi UFJ Financial and Sumitomo Mitsui Financial Group fell over 3%. Markets are concerned that the US government shutdown could create ripple effects on global financing conditions.
Gold prices reached new highs driven by safe-haven demand. Today (October 1) during trading, spot gold briefly touched $3,880 per ounce, while COMEX gold futures broke through $3,900 per ounce, both setting historical highs. Many analysts predict that gold prices will soon breach the key psychological level of $4,000 per ounce in the coming days.
**US Stock Futures Plunge Across the Board**
During Wednesday trading, US stock futures fell sharply across major indices, with Nasdaq futures dropping over 1% at one point and S&P 500 futures declining nearly 0.9%. As of publication, Nasdaq futures were down 0.96%, S&P 500 futures fell 0.79%, and Dow futures dropped 0.67%.
The US dollar also experienced a decline. As of publication, the dollar index fell 0.33%, marking the fourth consecutive trading day of declines. The dollar fell 0.52% against the yen, 0.34% against the euro, 0.37% against the Swiss franc, and 0.22% against the British pound.
On the news front, at 0:00 local time on October 1, the US federal government shut down due to funding depletion. This marks the first government shutdown in nearly seven years. On the evening of September 30 local time, White House Office of Management and Budget (OMB) Director issued a memorandum instructing government agencies to begin implementing their "orderly shutdown" contingency plans. Previously, the two parties failed to reach agreement on a new temporary funding bill due to disagreements over healthcare benefits.
According to media analysis, during the government shutdown, approximately 750,000 federal employees may face "forced unpaid leave" daily, with their combined daily wage costs totaling about $400 million. Additionally, food stamps for millions of pregnant women and children will be affected, housing assistance and energy subsidies will be delayed due to funding gaps, and federal support for preschool education and school lunches may require local government funding, significantly increasing state and county fiscal pressure.
Transportation, travel, healthcare, and public health will all be impacted. Staff shortages will not only cause flight delays and frequent queues, but also halt new route approvals, pilot training, and license issuance. Furthermore, routine statistical updates from the CDC and FDA, drug approval processes will slow down, and services like customer support for government health insurance and case appeals will become difficult to access.
**US Government Shutdown Disrupts Stock Market Trends**
Analysts point out that this US government shutdown could disrupt the stock market rally. Year-to-date, the Dow has gained over 9%, the Nasdaq has risen over 17%, and the S&P 500 has climbed nearly 14%. Currently, US stock markets are showing signs of weakness, with growing questions about labor market strength. The government shutdown could also delay the release of key economic data, including the employment report scheduled for release this Friday, which could have provided market clues about future Federal Reserve policy.
Matt Maley, Chief Market Strategist at Miller Tabak+Co, stated that if employment data is delayed, "this would only further amplify the uncertainty created by this shutdown. As we enter a new quarter, this should increase market volatility."
Matt Gertken from BCA Research noted that a prolonged shutdown would create problems for industries closely tied to economic conditions, such as industrial and financial sectors. This also increases the possibility of crisis contagion. Citigroup stated: "The duration of the government shutdown is critical. As the shutdown extends, stocks tend to weaken while interest rates tend to rise."
Bloomberg Economics predicts that this government shutdown could raise the US unemployment rate from the current 4.3% to 4.7%. President Trump's threat to massively lay off employees rather than furlough them has intensified concerns about economic growth slowdown.
President Trump said on September 30 that during the federal government shutdown, he might dismiss "large numbers" of federal workers and cancel various programs. He blamed the layoffs on Democrats. The White House Office of Management and Budget has reportedly asked agencies to prepare layoff plans rather than simply furloughing employees as in previous shutdowns. This year alone, 300,000 federal agency workers have been forced to leave their positions.
Kyle Rodda, Senior Analyst at Capital.com, noted that typically, government shutdowns have minimal market impact, citing the example of Wall Street stocks actually rising during the month-long shutdown from 2018-2019. However, he added that current markets face two issues: delayed release of key employment data, and "President Trump's threat to permanently dismiss workers, which could turn the government shutdown into a minor labor market shock."
The previous and longest US government shutdown occurred from late 2018 to early 2019 during Trump's first term, when Democrats opposed funding for Trump's proposed border wall project, leading to a 35-day shutdown due to immigration disputes.
Most economists believe that each week of US government shutdown reduces GDP by 0.1 percentage points. However, this shutdown differs from previous ones as the White House has instructed federal agencies to prepare layoff plans during the closure, which could produce more lasting impacts.
Analysts generally believe that the US government shutdown could cost the American economy approximately $7 billion weekly, with delayed federal employee wage payments affecting consumer spending and market anxiety over policy uncertainty amplifying volatility. If the shutdown drags on and becomes intertwined with debt ceiling and fiscal deficit issues, it could also increase government borrowing costs.
The "data vacuum" created by the government shutdown is forcing markets to reassess Federal Reserve policy prospects. With the non-farm payrolls report absent, investors may pay closer attention to the later-released ADP National Employment Report, which is expected to show moderate private sector job growth of 50,000.
Against this backdrop, demand for safe-haven assets has intensified. International gold prices reached new historical highs during today's trading, with spot gold briefly touching $3,875 per ounce and COMEX gold futures breaking through $3,900 per ounce. Many analysts predict that gold prices will soon breach the key psychological level of $4,000 per ounce in the coming days.
This Congressional funding impasse, combined with strengthened Fed easing expectations and heightened geopolitical tensions in the Middle East increasing safe-haven demand, has become a potential driver for this round of gold price increases. Concerns about US fiscal deficits and unsustainable government spending have intensified market uncertainty, weakened the dollar, and increased gold's attractiveness as a safe-haven asset.
Given the ongoing US government shutdown, many analysts expect gold prices to soon breach the key psychological level of $4,000 per ounce in the coming days. UBS Group indicated that following this trend, gold prices could potentially rise to $4,200 by mid-2026.
