Extended US shutdown clouds outlook, raises policy uncertainty

US stocks pulled back from record highs on Tuesday as the prolonged government shutdown dampened optimism over AI-driven growth. The S&P 500 fell 0.40%, snapping an eight-day winning streak, while the Nasdaq dropped 0.80% and the Dow slid 99 points. Selling pressure deepened after Oracle tumbled on weaker cloud margins, dragging the broader tech sector lower. Meanwhile, economically sensitive areas such as housing, airlines, and transport lagged, while tech stocks delivered mixed performances—AMD rose on an OpenAI deal and IBM gained on an AI partnership. With economic data releases on hold, investors turned to Federal Reserve commentary and secondary indicators, which pointed to potential rate cuts. Overall, the extended shutdown continues to cloud the outlook and heighten policy uncertainty.

European stocks edged lower on Tuesday, extending the previous session’s losses as investors weighed how France’s deepening political turmoil could strain the Eurozone’s fiscal outlook. Uncertainty mounted after President Emmanuel Macron gave outgoing Prime Minister Lecornu 48 hours to negotiate with rival parties following his resignation, amid resistance to proposed budget cuts. Financial stocks bore the brunt, with major banks and insurers—BNP Paribas, AXA, ING, and Santander—falling between 1% and 3%, led by renewed weakness in Paris-listed shares.

Japan’s Nikkei rose above 48 100 points, while the broader Topix gained 1% to 3 260 on Tuesday, rebounding from the previous session’s losses as softer wage data tempered expectations of a near-term Bank of Japan rate hike. The latest figures showed that real wages fell 1.40% in August compared to the same month a year earlier, marking the eighth consecutive monthly decline as inflation continued to erode household purchasing power. This reinforced investor expectations that the central bank will maintain its ultra-loose policy stance for longer, supporting equity sentiment. Adding to the market’s focus, investors also weighed the political outlook after Sanae Takaichi—a staunch advocate of “Abenomics” stimulus policies—won the race to become Japan’s next prime minister. Her victory fuelled optimism that pro-growth fiscal and monetary measures will remain in place, potentially bolstering corporate profits and export competitiveness.

South African equities edged lower, with the FTSE/JSE All Share Index falling 0.43% to close at 109 448.89 points. The decline came amid a mix of global and domestic pressures, including caution over US economic data and lingering local political uncertainty. Sector performance was mixed, with technology and telecommunications names leading gains—Datatec jumped nearly 10% after a robust interim forecast—while resource stocks such as Anglo American and Sasol retreated, reflecting weaker commodity prices. Financials were subdued, as banks and insurers traded cautiously ahead of upcoming corporate earnings reports. Overall, market sentiment remained fragile, with investors weighing both domestic policy developments and external economic cues before committing to further buying.

Commodity markets saw notable movements on Tuesday, with gold surging past $4 000 per ounce to a record high as investors sought safe-haven assets amid global economic uncertainties. Meanwhile, oil prices posted modest gains, with Brent crude rising 0.35% to $65.70 per barrel and WTI climbing 0.34% to $61.90 per barrel, supported by a smaller-than-expected OPEC+ output increase for November, which eased fears of a global supply glut. Overall, gold’s rally highlighted heightened risk aversion, while oil reflected cautious optimism amid supply management.