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No Paychecks, No Problem: Equities Hit Record Highs
Global stock markets were heading for a strong weekly gain and fresh record highs, as relentless momentum in technology shares and expectations of lower U.S. interest rates helped offset uncertainty around the latest U.S. government shutdown.
Investors largely shrugged off what is now the 15th shutdown since 1981. But on Friday it meant traders were missing one of the most closely watched pieces of economic data — the monthly U.S. payrolls report.
MSCI’s benchmark world share index, covering 47 countries, showed little concern after Wall Street and Europe both hit record highs overnight, with equities on track for their best week since April.
In Europe, services PMI data lifted the euro to an eight-month high, as moderate growth in Germany, Italy, and Spain offset lingering political uncertainty in France.
Christopher Hodge, U.S. economist at Natixis, said the absence of payroll data reinforced expectations among forecasters that the Federal Reserve will cut rates again this month. “The base case for another cut is the default in the absence of new information,” he noted, adding that markets have grown accustomed to managing through shutdowns. “The only difference this time is we’re in a much more uncertain economic and policy cycle.”
Benchmark government bond yields — a key driver of global borrowing costs — rose in both the U.S. and eurozone, though they eased in Britain after weak PMI data. Both regions, however, ended the week with overall declines in yields.
Markets are pricing in a 25-basis-point Fed cut this month and at least four cuts by the end of 2026.
Shift Toward Gold
MSCI’s main Asia-Pacific equity index ended the week up 2.3% and is now nearly 23% higher for the year. Trading was lighter than usual with China and parts of Asia closed for holidays, though Taiwan hit fresh record highs and Japan’s Nikkei jumped 1.5% ahead of a crucial weekend vote to decide the country’s next prime minister.
Wall Street futures also pointed higher, after all three major U.S. indexes closed at new peaks Thursday, fueled by investor enthusiasm for anything linked to artificial intelligence.
“We think investors are willing to give Washington time to resolve its differences,” said Weheng Chen, global investment strategist at J.P. Morgan Private Bank. “For now, they are far more focused on the Fed’s rate-cut cycle, trade and immigration policy, economic data, and corporate earnings.”
With no official U.S. labor market report, traders turned to alternative public and private data sources, which so far point to a cooling jobs market.
The dollar came under pressure, with the dollar index heading for its steepest weekly drop since August. The Japanese yen was among the biggest beneficiaries, though it slipped 0.3% to 147.74 per dollar after BOJ Governor Kazuo Ueda offered little clarity on the timing of the next rate hike.
In commodities, oil prices edged higher Friday but remained on track for their sharpest weekly drop in three months. Brent crude traded at $64.81 per barrel, while U.S. West Texas Intermediate stood at $61.30.
Gold, meanwhile, extended its rally for a seventh straight week, hitting $3,860 after notching a new record of $3,896 per ounce on Thursday.
Seen as a safe-haven in times of uncertainty and thriving in low-rate environments, gold is up 47% this year. “As the U.S. dollar’s role as the world’s reserve currency faces fresh tests, gold is emerging as a premier safe asset,” said Greg Heard, Global CIO of Multi-Asset at AllianzGI. “We continue to see it as one of the best diversifiers in portfolios.”
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