US government shuts down after funding deal fails

General market commentary

On Tuesday, US equities reversed early losses to finish higher, with the S&P 500 rising 0.4% to 6,688.5, the Nasdaq up 0.3% to 22,660, and the Dow Jones Industrial Average gaining 0.2% to close at 46,397.9. Most sectors ended the session in positive territory, led by healthcare and technology, though energy lagged. September was another month of gains across the major benchmarks, with the Nasdaq advancing 5.6% for its sixth consecutive monthly rise, while the S&P 500 and Dow added 3.5% and 1.9% respectively, marking five straight months of increases. Despite concerns over a looming US government shutdown, investors appeared willing to look past political uncertainty as equities extended their winning streak.

Bond markets saw mixed moves, with the 10-year US Treasury yield edging up to 4.16% and the two-year yield slipping slightly to 3.63%. The dollar weakened against major currencies, while oil prices fell on expectations of higher OPEC+ output and increased supply from Iraq’s Kurdistan region. Corporate news also supported sentiment, with strong gains in healthcare names such as Merck and Pfizer, as well as a surge in CoreWeave shares following a major AI infrastructure deal with Meta. Overall, equities closed the month on a positive note, buoyed by resilience in consumer spending and steady, albeit cooling, labour market conditions.

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Asian equities were mixed on Wednesday as tech shares tracked Wall Street gains, lifting South Korea and Singapore, while Japan’s Nikkei and TOPIX fell on rate hike concerns after the BOJ’s tankan survey showed stronger sentiment. Trading was muted by China and Hong Kong holidays, with India awaiting an RBI policy decision.

US equity futures slipped overnight amid uncertainty over a potential government shutdown, which could delay key economic data ahead of the Federal Reserve’s October policy meeting. Investors are also eyeing ADP’s private payrolls report due later today. Nike shares jumped 4.5% in after-hours trading following stronger-than-expected first-quarter earnings and revenue.

European equities closed higher on Tuesday, with the STOXX 50 up 0.4% to 5,530 and the STOXX 600 rising 0.6% to 558, as investors weighed the potential US government shutdown and Fed reaction. Industrial giants Wolters Kluwer, Safran, Siemens, and Schneider led gains, while banks including Santander and UniCredit also advanced. Third-quarter gains were strong.

The dollar index hovered near 97.8 this morning, pressured by concerns over a US government shutdown and mixed August jobs data, which showed modestly higher job openings but weaker hiring. Against the euro, the dollar eased to 1.1738. Investors are focused on the potential length of the shutdown and its impact on key economic releases ahead of the Fed’s October meeting.

Oil prices were largely steady in Asian trade this morning, with Brent at $66.15 and WTI at $62.46 per barrel, as a third consecutive US crude draw provided support. Markets remain cautious ahead of the OPEC+ meeting on 5 October, where potential output increases could create a surplus and weigh on prices through 2026.

The U.S. government shut down this morning at 06:00 CET after the Senate rejected a funding bill, suspending most federal operations and delaying key economic data. The White House confirmed the move, blaming Democrats. Previous shutdowns have cost billions, with analysts warning of prolonged deadlock and global market uncertainty.

Germany’s unemployment rose by 14,000 to 2.98 million, exceeding forecasts, while the jobless rate held at 6.3%. The non-adjusted figure topped 3 million for the first time in a decade. Weak labour market conditions reflect ongoing economic contraction, with Chancellor Merz’s planned infrastructure and defence spending yet to improve recovery.

Equities on the move

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

Nike reported a first-quarter revenue rise to $11.72 billion, beating expectations, with EPS of 49 cents versus 27 cents forecast. Wholesale revenues grew 5%, aided by inventory reductions, but margins remained under pressure from tariffs. China sales fell for a fifth consecutive quarter, while CEO Elliott Hill emphasises running and basketball to drive future growth.

CRH unveiled ambitious 2026–2030 targets, including 7–9% annual revenue growth, 22–24% EBITDA margins, and over 100% free cash flow conversion. The company reaffirmed 2025 guidance and highlighted $40 billion financial capacity for expansion, signalling strong growth prospects and confidence in its building materials strategy.

Taiwan has rejected US proposals to produce half of its semiconductors domestically, with Vice Premier Cheng Li-chiun stating no such commitment was made. Home to TSMC, a key supplier for AI processors, Taiwan continues high-level trade talks with Washington, seeking preferential treatment while maintaining a significant chip trade surplus despite existing US tariffs.

The U.S. Department of Energy will acquire a 5% stake in Lithium Americas and a separate 5% in its Thacker Pass joint venture with GM. The move, part of Washington’s strategy to boost domestic critical minerals, follows a $2.26 billion loan renegotiation. Lithium Americas’ shares rose 34% after the announcement, highlighting the project’s strategic importance.

Shares of US drugmakers rose following President Trump’s announcement that Pfizer will cut Medicaid drug prices in exchange for tariff relief, with other firms expected to follow. The deal, part of the White House’s “most favoured nation” policy and upcoming TrumpRx platform, is seen by analysts as a positive catalyst for the sector.

Robinhood Markets reported strong September trading, with 187 million option contracts traded, and announced plans to expand its prediction markets product internationally. The move positions Robinhood as a direct competitor to sports-betting platforms, raising concerns for operators like DraftKings and Flutter, as regulatory classifications for prediction markets vary across countries.

Spotify founder Daniel Ek will step down as CEO in January to become executive chairman, adopting a co-CEO structure with Gustav Soderstrom and Alex Norstrom. Ek will focus on strategy and capital allocation, while the co-CEOs manage product, business, and operations. Spotify faces competition and margin pressure despite nearly 700 million users and market leadership.

Visa is piloting a program allowing businesses to fund international payments using stablecoins instead of pre-depositing cash, aiming to speed up cross-border transactions and free up capital. The initiative, supported by the US Genius Act, reflects growing mainstream adoption of stablecoins and integration into existing financial infrastructure.

China’s state iron ore buyer, CMRG, has asked steelmakers to pause dollar-denominated purchases from BHP during annual price negotiations, viewed by analysts as a negotiating tactic to secure lower long-term prices. Short-term impact is limited due to existing inventories, while BHP faces pressure from slowing Chinese demand and plans to cut exploration spending.

OpenAI generated $4.3 billion in revenue in H1 2025, up 16% year-on-year, but burned $2.5 billion on operations, mainly for AI development and ChatGPT. The company spent $6.7 billion on R&D and aims for $13 billion revenue and $8.5 billion cash burn for 2025, attracting new investors including NVIDIA and SoftBank.

Chinese AI developer DeepSeek has unveiled an experimental large language model with improved training and reasoning, using a "sparse attention" technique that halves API (Application Programming Interface) costs. The company describes it as a major advancement in its next-generation AI lineup, offering more efficient and affordable access for developers.

Amazon unveiled a refreshed lineup of devices, including Echo speakers, Fire TV, a new Kindle Scribe, and upgraded Ring and Blink cameras, all integrated with its AI-powered Alexa+ assistant. The improvements feature faster processing, facial recognition, and enhanced home security, with pricing from $40 to $630. The updates aim to boost personalisation and profitability of Alexa.

Berkshire Hathaway is reportedly in talks to acquire Occidental Petroleum’s petrochemical unit, OxyChem, for around $10 billion. Occidental, valued at approximately $46 billion, already counts Berkshire as its largest shareholder. The deal could be finalised within days if negotiations proceed successfully, according to sources cited by the Wall Street Journal.

Germany’s top appeals court overturned a lower court decision approving Volkswagen’s dieselgate insurance settlement. The case will be sent back for a new hearing, where the lower court must consider legal challenges to shareholder votes that approved compensation for former board members involved in the scandal.

Lufthansa faces a potential strike after its pilots’ union, VC, voted in favour of industrial action over pensions. The airline resists pension enhancements, threatening job shifts to cheaper subsidiaries, while pursuing efficiency plans, including 4,000 administrative job cuts by 2030, amid ongoing labour challenges and cost-cutting efforts.

Citigroup has raised its forecast for AI-related infrastructure spending to over $2.8 trillion through 2029, driven by hyperscalers like Microsoft, Amazon, and Alphabet. AI capex could reach $490 billion by 2026, requiring 55GW of new power. High costs are being funded partly through borrowing, impacting free cash flow.

Marvell Technology shares fell 1.6% in after-hours trading following a downgrade to Hold by TD Cowen’s Joshua Buchalter, citing low visibility in the cloud and custom XPU business and rising competition in electro-optics. Despite strong AI-related growth and a tripling datacenter business, the analyst highlighted uncertainty over future customer wins and long-term stability.

Citi raised its price target for NVIDIA to $210, citing higher AI infrastructure spending and a strong company roadmap. Analysts highlighted management’s confidence in GPU execution and the Rubin CPX launch, affirmed the one-year product cadence, noted OpenAI’s $100 billion investment plan, and stated the Intel partnership adds x86 options, while reiterating a Buy rating.

Canaccord Genuity raised Tesla’s price target to $490, maintaining a Buy rating, citing stronger deliveries, new vehicle launches, and rising energy storage demand. Musk’s leadership and compensation plan, potential xAI gains, and approval for autonomous ride-hailing trials in Arizona support global sales momentum and future shareholder returns.

Morgan Stanley raised TSMC’s price target to NT$1,588, citing strong AI demand, stable FX, and pricing power. It expects TSMC to exceed 4Q25 revenue and margin guidance, with 3nm wafer supply tight and potential price hikes. Advanced 2nm–A16 chips see growing adoption, while 2026–27 earnings forecasts rise 10–15%.

Goldman Sachs downgraded Spotify to Neutral from Buy, citing that much of its growth is already priced in following a 120% rally since July 2024. Revenue is expected to grow mid-teens over the next few years, driven by subscription price increases, emerging market growth, and rising advertising revenue, while profit margins improve.

Evercore ISI began coverage of CoreWeave with an Outperform rating and $175 target, citing its role as a leading AI-focused cloud provider. Operating 250,000 GPUs across 33 data centres, it benefits from multi-year contracts and partnerships with OpenAI and Nvidia, though high capital expenditure and client concentration remain key risks.

Bank of America downgraded Oklo to Neutral and NuScale to Underperform, citing valuations ahead of realistic SMR adoption. Price targets were set at $117 for Oklo and $34 for NuScale. Analysts highlighted execution, fuel, and supply chain risks, noting limited near-term upside despite a positive long-term nuclear outlook.

BTIG downgraded Instacart parent Maplebear to Neutral from Buy, citing intensifying competition from Amazon, DoorDash, and Uber in grocery delivery. Analyst Jake Fuller highlighted recent partnerships covering 40% of Instacart’s gross order value, reducing growth visibility and making sustained double-digit expansion unlikely. Fair value is now estimated between $30 and $50.

Bernstein upgraded Brunello Cucinelli to “outperform” after a 12% share decline, highlighting strong fundamentals and resilient high-net-worth demand. Regulatory and ethical concerns were addressed, while retail and wholesale growth are expected across key regions, making the equity an attractive entry point for investors seeking exposure to the luxury market.

Mizuho initiates coverage of U.S. internet equities, highlighting online advertising growth and naming Meta Platforms its top pick. Other favoured shares include Amazon, Pinterest, and Airbnb, supported by AI-driven engagement and advertising efficiency across advertising, e-commerce, rideshare, and online travel.

Evercore ISI raised oil price forecasts, citing resilient demand and supply shortfalls. Brent is projected at $69/bbl for Q3 2025 and $65 for 2026 as inventories draw down. Near-term oversupply persists, but stronger-than-expected demand and constrained supply point to firmer prices into 2026, despite macro and market risks.

Moody’s downgraded Braskem S.A.’s Corporate Family Rating to Caa3 from B2, with a negative outlook, citing high leverage, ongoing cash burn, and weak operations. Despite strong margins and market leadership, the company faces strained EBITDA, Alagoas-related disbursements, and petrochemical spread volatility, with further downgrades possible if creditor losses increase.

Upcoming data and events

Today’s economic calendar includes US private sector employment, manufacturing activity, and crude oil inventories, alongside German and French Manufacturing PMIs and Eurozone CPI month-on-month. No major company earnings are scheduled.

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