Equities close off highs as US government shutdown looms

General market commentary

US equity markets finished higher on Monday, with mid-cap equities leading gains over large- and small-caps. The Nasdaq Composite rose 0.5% to 22,591.2, the S&P 500 added 0.3% to 6,661.2, and the Dow Jones Industrial Average advanced 0.2% to 46,316.1, marking a second consecutive day of gains. Softer Treasury yields and a weaker US dollar supported sentiment, even as investors remained cautious about a potential government shutdown and awaited key labour market data later in the week.

Technology shares were among the day’s standouts, with Nvidia climbing after a broker upgrade and Electronic Arts rising on news of a multibillion-dollar acquisition deal backed by international investors. Geopolitical developments also captured attention, as President Trump and Israeli Prime Minister Benjamin Netanyahu announced an agreement on a plan aimed at ending the war in Gaza, though Hamas stated it had not reviewed the proposal. These factors together contributed to the market’s cautiously optimistic tone.

Latest market and economic update

Asian equities were largely range-bound on Tuesday, with mixed economic data and caution ahead of central bank decisions limiting moves. China’s shares were muted amid divergent PMI readings, Japan’s Nikkei fell 0.2%, while South Korea and Singapore saw modest gains. Investors also monitored a potential US government shutdown and new trade tariffs.

US equity futures were mostly flat overnight, following Monday’s gains driven by a rebound in AI and technology shares. After-hours trading saw modest retreats, with S&P 500 and Nasdaq 100 futures down 0.1% and Dow futures slightly lower. Investors remain cautious ahead of a potential government shutdown and key labour market data.

European equities closed slightly higher on Monday, supported by a positive market tone and corporate news. The Euro STOXX 50 rose 0.3% and the STOXX 600 gained 0.4%. AstraZeneca advanced 1% on plans for a NYSE listing, GSK climbed 2.3% after appointing a new CEO, Lufthansa edged up on strong cash flow guidance, while base metal miners rallied 2%-6%.

The US dollar index hovered near 98 this morning after two sessions of losses, reflecting caution over a potential government shutdown and delayed economic data. Against the euro, the dollar was slightly weaker, trading around $1.1721, as investors weighed labour market signals and expectations of further Federal Reserve rate cuts.

Oil prices extended losses on Tuesday, with Brent down 0.5% at $67.65 and WTI slipping 0.4% to $63.19 per barrel, following a 3% drop on Monday. Markets were pressured by OPEC+ plans to raise production in November, easing of Gaza-related geopolitical risks, resumed Iraqi exports, and weak Chinese manufacturing activity, all signalling potential oversupply.

China’s official PMI data showed manufacturing activity contracting for a sixth consecutive month in September, with the gauge at 49.8, while services also weakened. In contrast, private PMI readings indicated growth in both sectors, with manufacturing at 51.2 and services at 52.9. The mixed data highlights ongoing pressure on exports and the need for further stimulus from Beijing.

U.S. President Trump and Democrats made little progress in talks to prevent a government shutdown set for Wednesday, with disputes over healthcare and funding timelines unresolved. A shutdown could furlough thousands of federal workers and disrupt services. Republicans and Democrats remain at odds, with healthcare tax breaks and discretionary spending at the centre of negotiations.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

The Pentagon plans to sharply boost missile production to prepare for potential conflict with China, increasing focus on U.S. defence equities. It aims to double or quadruple output of key systems, including Patriot interceptors and SM-6 missiles, while Boeing and Northrop Grumman expand capacity. Concerns persist over whether targets are feasible without additional funding.

Boeing is planning a new single-aisle aircraft to succeed the 737 MAX and compete with Airbus, according to the Wall Street Journal. Early-stage work includes designing a flight deck and exploring a Rolls-Royce engine promising up to 20% greater fuel efficiency. The project could take over a decade and cost tens of billions of dollars.

Carnival Corp raised its 2025 profit forecast to an adjusted EPS of $2.14, citing strong demand, higher onboard spending, and ticket pricing. The company invested $600 million in its private resort, Celebration Key, and reported Q3 sales of $8.15 billion, slightly above estimates, as bundled packages boosted revenue.

AstraZeneca plans to move its U.S. trading from American depositary receipts to a direct listing on the NYSE, aiming to access a broader investor base while keeping London and Stockholm listings. The proposal, requiring November shareholder approval, reflects challenges in the UK market and reduced domestic investment.

Lufthansa plans to cut 4,000 administrative jobs by 2030 and raise profitability targets, aiming for an 8–10% operating margin from 2028 and over €2.5 billion in annual free cash flow. The airline will expand its fleet, increase digitalisation, and integrate subsidiaries to improve efficiency, focusing cost reductions mainly in Germany.

KLM will lose Air France and Delta as ground-handling clients at Schiphol after strikes by its ground crew caused major disruption and financial losses. The move has immediate operational impact, with financial and job consequences under review. Unions remain defiant, planning further strikes despite partial agreements already reached.

TotalEnergies announced plans to cut annual capital spending by $1 billion to $15–17 billion from 2027–2030, targeting $7.5 billion in savings amid investor concerns over debt. The French major faces rising debt, slow asset sales, and weaker oil prices. Recent deals include a $950 million solar stake sale and a U.S. gas acquisition.

Indra is reportedly considering acquiring Tecnobit, Oesia’s defence unit, which generated €105 million in revenues in 2024 and specialises in avionics, radar, optronics, and secure communications. The move would bolster Indra’s defence portfolio and drone capabilities. Separately, Indra plans to absorb EM&E by November, though delays are possible after the SILAM programme’s cancellation.

Shares of cannabis companies surged after Trump highlighted cannabidiol’s potential benefits for senior healthcare and suggested reclassifying marijuana. Reclassification could ease regulatory and tax burdens, support wider federal acceptance, and bridge gaps between state and federal laws, boosting industry growth and encouraging institutional investment in the sector.

Goldman Sachs upgraded equities to Overweight and cut credit to Underweight, citing Fed dovishness, fiscal easing and AI-driven growth optimism. Equities, led by U.S. tech and financials, are seen outperforming despite late-cycle risks, while tight credit spreads limit upside. Commodities were lifted to Neutral, with cash seen as unattractive post-rate cuts.

Bank of America’s Global Equity Risk-Love indicator signals early euphoria as markets near new highs, with sentiment in the 85th percentile since 1987. Emerging Markets and Asia ex-Japan show strong optimism, led by China and Taiwan. BofA remains bullish, citing earnings growth, global monetary easing, a weaker dollar, and broad market participation.

Morgan Stanley downgraded Novo Nordisk to Underweight and cut its price target to DKr 300, citing flat U.S. prescription trends for Ozempic, Wegovy and Rybelsus, rising competition from Eli Lilly, and looming pricing pressures. The bank forecasts slower sales growth, negative earnings revisions, and valuation compression as patent expiries approach.

Bernstein named Oracle the top large-cap software play on generative AI, raising its price target to $364 and reaffirming outperform. Analysts project revenues surging to $200bn by 2030, driven by cloud and AI datacentre demand, despite margin pressure and heavy capex. Oracle has strongly outperformed the S&P 500 this year.

Mizuho upgraded ASML to Buy, raising its price target to €930, citing strong demand for EUV equipment from key chipmakers. Earnings per share are forecast to grow 6% in 2026 and 21% in 2027, driven by TSMC, Samsung, Intel, and China’s wafer fab expansion. The bank now values ASML at 30x estimated 2027 earnings.

Morgan Stanley raised its Alibaba price target to $200 from $165, citing stronger cloud growth, new partnerships, and expanded international data centres. It lifted cloud growth forecasts to 32% for FY26 and 40% for FY27, while also expecting sustained e-commerce momentum. Revenue estimates and valuation assumptions were also upgraded.

Morgan Stanley downgraded Wells Fargo and U.S. Bancorp to Equal-weight, citing limited upside and vulnerability to falling interest rates, despite a supportive banking outlook from expected Fed rate cuts. Wells Fargo’s post-asset cap removal gains are largely priced in, while U.S. Bancorp faces deposit cost risks. Citizens Financial was upgraded to Overweight on strong profitability prospects.

UBS upgraded SoftBank’s price target to 23,500 yen from 17,400 yen, valuing its NAV at 42.5 trillion yen with a 20% discount, down from a five-year average of around 50%. The upgrade reflects growing clarity and value in SoftBank’s AI assets, including OpenAI, Stargate, and Arm, and highlights potential for the company’s historically steep discount to narrow as these investments mature.

Barclays initiated coverage on Oklo with an Overweight $146 price target, highlighting SMRs as a clean, 24/7 energy solution amid rising power demand. The company also announced a $5 million strategic partnership with Sweden’s Blykalla AB to share technology, supply-chain insights, and licensing knowledge, aiming to reduce costs and accelerate nuclear deployment.

Upcoming data and events

Today’s market macro focus is on the JOLTs job openings and consumer confidence in the US. In earnings, Nike reports results, providing insight into the athletic apparel sector and broader consumer trends.

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