Stocks Rise, Bonds Fall as US Shutdown Averted: Markets Wrap

(Bloomberg) — Stocks rose and Treasuries fell after US lawmakers reached a deal on the weekend to avoid a government shutdown.

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Europe’s Stoxx 600 index rose about 0.2% on the first trading day of the fourth quarter, and futures on the Nasdaq 100 advanced 0.7% after compromise legislation passed on Saturday to keep the government running until Nov. 17.

Both indexes trimmed gains from earlier in the session as investors returned to parsing economic data and higher oil prices to gauge whether central banks will raise interest rates any further. Treasury 10-year yields rose as much as five basis points to the highest since 2007, while German borrowing costs advanced about three basis points.

“Financial markets were bracing for a shutdown, so there’s an element of relief, but it’s only a temporary lifting of one of the clouds hanging over the markets now,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “Interest rates and Fed hawkishness remain the name of the game and the main driver of the markets over the next few weeks.”

Read More: Traders Win Reprieve After ‘Political Circus’ of Shutdown Fight

The US government funding deal may spur markets to bring forward bets of a November rate hike, some traders said. Swaps are pricing just under a one-in-three chance of a November move, according to data compiled by Bloomberg.

Investors could glean clues later in the day when Fed chief Jerome Powell speaks at a roundtable discussion, alongside Philadelphia Fed President Patrick Harker. Their views will be of particular interest after New York Fed boss John Williams suggested Friday interest rates should stay high for some time.

Among individual European stock movers, asset manager Mandatum debuted on Helsinki’s stock market, the biggest listing in five years. In US premarket trading, tech stocks led gains, with strategists at Goldman Sachs Group Inc predicting the sector to do well, benefiting from lower valuations after the recent selloff and a pullback in bond yields.

In currency markets, the dollar edged higher versus its Group-of-10 peers, after enjoying its best quarter in a year. Against the yen, it briefly touched a year-to-date high of 149.82, after the Bank of Japan said it would conduct an additional buying operation.

Key events this week:

China has week-long holiday
Bank of England policy maker Catherine Mann speaks on monetary policy, Monday
Fed Chair Jerome Powell and Philadelphia Fed President Patrick Harker participate in a roundtable discussion, Monday
New York Fed President John Williams moderates discussion on climate risk, Monday
Cleveland Fed President Loretta Mester speaks on economic outlook, Monday
US ISM manufacturing index, Monday
Australia rate decision, Tuesday
Atlanta Fed President Raphael Bostic speaks on economic outlook and inflation, Tuesday
August US JOLTS report, Tuesday
Eurozone services and composite PMIs, Wednesday
ECB President Christine Lagarde gives welcome address at conference, Wednesday
US ISM services index, Wednesday
France industrial production, Thursday
BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
Germany factory orders, Friday
September US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.2% as of 9:38 a.m. London time
S&P 500 futures rose 0.6%
Nasdaq 100 futures rose 0.8%
Futures on the Dow Jones Industrial Average rose 0.4%
The MSCI Asia Pacific Index fell 0.2%
The MSCI Emerging Markets Index rose 0.1%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0565
The Japanese yen fell 0.2% to 149.71 per dollar
The offshore yuan was little changed at 7.2977 per dollar
The British pound was little changed at $1.2187

Cryptocurrencies

Bitcoin rose 5% to $28,476.25
Ether rose 4% to $1,740.99

Bonds

The yield on 10-year Treasuries advanced four basis points to 4.61%
Germany’s 10-year yield advanced three basis points to 2.87%
Britain’s 10-year yield advanced five basis points to 4.48%

Commodities

Brent crude rose 0.3% to $92.51 a barrel
Spot gold fell 0.3% to $1,843.18 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess and Joanna Ossinger.