Markets Weekly Outlook - Navigating the US Shutdown & Global Trends as Equity Markets Continue to Soar

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Week in review

A week that seemed like it might be a busy one from a data perspective did not deliver. Markets were braced for US jobs numbers and the NFP report which never arrived after the US congress failed to agree on funding.

This led to a Government shutdown, something which occurred during the first Trump administration as well.

Since the official government jobs report was delayed, some people turned to the ADP employment estimate instead, a report that measures only private-sector jobs.

This report, which is sometimes unreliable compared to the official data, was quite negative this week. It showed that the US private sector lost 32,000 jobs in September.

Source: Macrobond, ING

As things stand markets continue to fully price in a rate cut at the Fed's October meetings with a December rate cut also priced in at around a 90% probability.

The current government shutdown and the resulting lack of new economic data probably won't change this long-term debate. As long as the shutdown doesn't last for an extremely long time, the affected government workers will receive all their missed pay, meaning there should be very little permanent damage to the economy.

The only uncertainty is whether the threats of widespread layoffs will actually happen.

So How did the Markets Perform?

On Friday, the major Wall Street stock indexes hit new record highs during the trading day. This continued strong rally is notable because it's happening even as the federal government shutdown enters its third day, making the economic outlook unclear due to missing data.

The positive mood in the market is being helped by excitement over Artificial Intelligence (AI), and investors seem unconcerned since markets have generally ignored shutdowns in the past.

According to the most recent survey of individual investors (AAII):

• Bullish sentiment (the belief that stocks will rise) increased to 42.9%. This is above its historical average for the third time in nine weeks, showing growing optimism.
• Bearish sentiment (the expectation that stocks will fall) remained unchanged and has been above its historical average for almost all of the past 35 weeks, indicating lingering caution.
• Neutral sentiment (the belief that stocks will stay the same) fell to 17.9%. This number has been well below its long-term average for over a year, meaning very few investors currently believe the market will simply remain flat.

US Indices were all on course for another week of gains. The Nasdaq 100 is on course for gains of around 1.20%, the Dow Jones is up 0.94% and the S&P 500 is eyeing gains of 1.16%.

In Europe and Asia the story was similar as they tracked gains from Wall Street. The STOXX 600 is set for its biggest weekly jump since April.The IBEX was ending the week strong, trading up around 0.98% on Friday.

Cross Asset Performance for the Week

Source: TradingView

How has the US Dollar Reacted?

The US dollar pulled back on Friday and is expected to finish the week with losses against several major currencies. Leading this trend, the euro rose 0.2% against the dollar to $1.1739, putting it on track for its best weekly performance in a month.

This strength in the euro caused the overall dollar index (which tracks the dollar's value against key currencies) to drop 0.1% to 97.72, setting it up for its worst weekly result since July.

The dollar also weakened against the Swiss franc, falling 0.3% and heading for its biggest weekly drop since mid-August.

Similarly, the dollar slid against the British pound, which rose 0.3% and is poised for its largest weekly gain since August. The dollar's decline accelerated after new data showed that the US services sector growth stalled in September due to a sharp drop in new business.

Meanwhile, the Japanese yen pulled back from the strong gains it made earlier in the week as traders looked ahead to a major political election this weekend and tried to predict the next move by the Bank of Japan.

In commodity markets, gold prices rose and stayed near their record highs, on track for their seventh straight weekly gain.

Finally, oil prices rose on Friday but are still heading for a large weekly loss of 7% or more, following reports that OPEC+ might increase its supply.

The Week Ahead

Next week is a quiet week from a data perspective and may be welcomed by market participants.

Obviously the US shutdown is not ideal, but after a busy few weeks of data releases and with earnings season around the corner, market participants may welcome some calm before a potential storm in Q4.

Let us take a look at what may move markets from a data perspective next week.

Asia Pacific Markets

Since Chinese markets are currently closed for the long Golden Week holidays (they won't reopen until next Thursday), the usual economic reports on inflation and trade will be delayed by a week.

Therefore, the main focus for now will be on reports detailing how much people traveled and spent money during the holiday period. It is also possible that the data on China's total new loans and credit (aggregate financing) could be released later in the week.

It is a quiet week in Japan with a speech by Governor Ueda the main highlight after the elections this weekend. For more information on the Japanese elections and the Yen, please read USD/JPY Price Outlook: Key Levels, BoJ, and Political Risks.

Attention will turn to the Reserve Bank of New Zealand rate decision on Wednesday. Markets are expecting the Reserve Bank of New Zealand (RBNZ) will lower its interest rate by 0.25% on October 8th, which is what most experts and market pricing currently expect.

US Government Shut Down, Euro Area & UK Data

The main issue next week is the government shutdown in the U.S. Depending on how long it lasts, market participants might not receive many official economic reports. Even if an agreement is reached soon, it will take time to get workers back and release schedules back on track. Reports that could be delayed next week include the trade balance, weekly jobless claims, and inventory numbers.

Despite this, the Federal Reserve (Fed) will still release the minutes from its September meeting (on Wednesday), where they cut rates by 25 basis points. We will also get the August consumer credit data and the initial October consumer sentiment index from the University of Michigan.

Consumer spending is currently stable, but confidence has already fallen sharply this year due to a weaker job market and worries about how tariffs are driving up prices. With millions of federal workers facing missed paychecks or permanent layoffs due to the shutdown, it is unlikely that consumer confidence will improve.

A quiet week for the Euro Area and the UK as well from a data perspective. The EU will release retail sales before we get a speech by ECB President Christine Lagarde.

In the UK the main highlight of the week comes from a speech by Bank of England (BoE) Governor Bailey.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Chart of the Week - US Dollar Index (DXY)

This week's Chart of the week is the US Dollar Index (DXY)

From a technical perspective, the DXY continues to hug on to a key area of support around the 97.70 handle.

Any attempt to push higher by DXY bulls is facing a challenge with the 100-day MA resting at the 98.19 handle. A move beyond that handle may find resistance at 99.58 before the psychological pivot level at 100.00 comes back into the discussion.

A move lower may find support at the swing low around the 97.20 handle before the 96.90 and YTD low 96.37 handles come into focus.

US Dollar Index (DXY) Daily Chart - October 3, 2025

Source:TradingView.Com (click to enlarge)

Safe Trades.

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