US government shutdown delays key economic data

General market commentary

On Friday, despite ongoing concerns over the U.S. government shutdown, shares rose across major indices. The Dow Jones recorded a new closing high, outperforming the S&P 500 and the technology-heavy Nasdaq. Investor sentiment was supported by lighter-than-expected ISM services data for September, which nonetheless indicated expansion, and by near-certain expectations of a Federal Reserve rate cut in October. Although the ISM employment index remained in contraction, reflecting a softening labour market, broader economic indicators such as resilient consumer spending and robust AI investment continued to underpin confidence.

Over the week, the equity market maintained strong momentum, with the S&P 500 gaining nearly 8%, the Nasdaq up 11%, and small-cap shares, as measured by the Russell 2000, advancing 12%. Market strength was driven by both secular tailwinds from AI innovation and cyclical support from easing monetary policy. Historical precedent suggests that the current government shutdown is unlikely to have a lasting impact on equities, with corporate profits remaining near record highs and third-quarter earnings expected to show double-digit growth. Overall, the combination of economic growth, solid profitability, and declining interest rates provided a resilient backdrop for shares, even amid temporary data gaps and heightened uncertainty.

Latest market and economic update

Japanese equities led Asian markets higher on Monday, with the Nikkei 225 surging 4.5% to a record after Sanae Takaichi’s LDP leadership win boosted hopes of fiscal stimulus. The yen’s sharp fall also lifted exporters. Elsewhere, trading was muted on China and South Korea holidays; Hong Kong slipped 0.5% on tech weakness, while Singapore and Australia were flat.

U.S. equities index futures rose on Sunday evening after Wall Street recorded strong weekly gains, led by technology shares and optimism over AI and potential Fed rate cuts. S&P 500 Futures climbed 0.3%, Nasdaq 100 Futures 0.4%, and Dow Jones Futures 0.2%. The government shutdown delayed key economic data, leaving investors reliant on private reports for insights.

European shares closed mostly higher on Friday, extending the week’s positive momentum. The Eurozone STOXX 50 nudged up to 5,651 and the STOXX 600 rose 0.5% to 570, both at record highs. Gains were led by healthcare and luxury brands, boosted by easing US tariff concerns and strong Chinese consumption, while the tech sector struggled to maintain earlier advances.

The dollar index rose above 98 on Monday, recovering last week’s losses amid uncertainty from the U.S. government shutdown, which has delayed key economic data. Expectations of Federal Reserve rate cuts supported the greenback, which gained over 1% against the yen, while EUR/USD traded around 1.1730 following Japan’s vote favouring fiscal dove Sanae Takaichi.

Oil prices climbed about 1.5% in Asian trade this morning after OPEC+ agreed to a smaller-than-expected output hike of 137,000 bpd for November, easing fears of oversupply. Brent rose to $65.44 and WTI to $61.77. Gains may be capped, however, as analysts warn of weak demand, refinery maintenance and rising risks of global oversupply into winter.

Equities on the move

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

Bank of America forecasts AI capital spending nearly tripling to over $1.2 trillion by 2030, driven by infrastructure upgrades, enterprise adoption, sovereign projects, and protecting tech moats. Funded by hyperscalers’ strong cash flows, the buildout supports cloud and chip vendors, while Nvidia’s OpenAI commitment accelerates broader investment without costly consumer upgrades.

Novo Nordisk plans to launch its new obesity pill via telehealth platforms such as Ro and WeightWatchers once approved, aiming to regain market share from Eli Lilly. The pill, containing the same active ingredient as Ozempic and Wegovy, could be available in early 2026, potentially with a subscription model offering six- to twelve-month supplies at discounted rates.

Stellantis NV plans to invest around $10 billion in the United States to revitalise its American operations, focusing on Jeep and Ram brands. The multi-year investment, including $5 billion in new funding, could support plant re-openings, hiring, and new models, with potential projects for Dodge and Chrysler still under discussion and subject to change.

A U.S. Army memo flagged serious security risks in the NGC2 battlefield communications system by Anduril and Palantir, citing unrestricted access and unverified third-party applications. Both companies defended their platforms, while the Army continues addressing vulnerabilities and advancing approvals for software updates.

Freeport confirmed all seven workers missing after the early-September accident at Indonesia’s Grasberg mine have been found dead. Operations remain suspended as investigations continue, with conclusions expected by end-2025. Freeport said copper and gold sales guidance for Q3 remains unchanged while it works with authorities on future operating plans.

Goldman Sachs reiterated Amazon as a top pick ahead of Q3 earnings, citing underestimated growth in AWS and its advertising business. Despite cloud competition, AWS’ contracted revenue and AI services support growth, while advertising boosts profits. The brokerage raised its price target to $275, expecting multi-year revenue and margin expansion.

Jefferies downgraded Apple to Underperform, citing excessive expectations for the iPhone 18 Fold and replacement cycle. Stronger iPhone 17 demand stems from price cuts, not innovation. The firm highlighted foldable iPhone challenges, limited market size, Samsung competition, and an overvalued share price relative to realistic demand forecasts.

Oppenheimer has reaffirmed an Outperform rating on Netflix with a $1,425 price target, citing strong Q3 engagement, including a 20% year-on-year increase in hours viewed. The analysts highlight growth potential from live events and sports rights, downplay competitive risks, and view the company’s upcoming 2026 guidance as an additional catalyst for the equity.

JPMorgan has lowered its price target for MercadoLibre to $2,600 from $2,700, maintaining a Neutral rating, citing rising competition in Brazil and an expected Q3 EBIT miss. While revenue is projected slightly above consensus, margins and earnings are forecast to fall due to higher logistics costs and currency weakness, reflecting a mid-term trend of increased reinvestment.

Wolfe Research downgraded PayPal to Peer Perform, noting progress in Venmo and Braintree but slow growth in its core branded checkout business. Branded volume is expected to rise 5% in Q3, yet consumer weakness, competition, and rollout delays limit upside. Fair value was cut to $70-$80, with stock seen trading sideways until growth accelerates.

Berenberg sees Ferrari as a “quality compounder,” expecting 2026 earnings to exceed estimates via higher-priced models and Special editions, boosting margins and cash flow. Despite concerns over residual values and customer complaints, it maintains a Buy rating with a $570 target, citing strong pricing power, order backlog, and high cash conversion supporting luxury-like valuations.

UBS has upgraded Freeport-McMoRan to Buy, raising its price target to $48 from $42.50, arguing the market is overestimating the impact of the mud flow at its Grasberg copper mine. The bank expects production to return to pre-incident levels by 2027, with feasible recovery measures, while ongoing copper deficits support upside potential.

Rothschild & Co upgraded Coinbase to Buy with a $417 target, citing diversification into institutional trading, derivatives, and stablecoin services, while starting Circle at Neutral due to reliance on interest income and regulatory risks. Robinhood remained a Sell at $68, with cyclical crypto economics, fee pressure, and dependency on retail traders limiting upside.

Wells Fargo said Starbucks’ new protein drinks, launched in U.S. stores on 29 September, could lift North America sales by $720 million annually and help capture 10% of the $10 billion protein market. The move comes as the chain faces flat sales, restructuring costs and cautious investors, with shares down 10% since Q3 results.

Citizens reiterated a Market Outperform rating on Reddit with a $300 price target, highlighting the platform’s advertising monetization potential. Despite concerns over declining daily active users and SEO, U.S. logged-in users generate significantly higher revenue, with mature ad tools expected to drive near-term earnings outperformance.

UBS said Dick’s Sporting Goods’ acquisition of Foot Locker could create far more value than investors expect, despite a 14% drop in Dick’s shares on announcement. The bank cited potential margin improvements, market share gains, store optimisation, and reduced promotional pressure, estimating a 60% upside versus 20% downside, with buybacks likely to further boost earnings.

Piper Sandler downgraded Instacart to Neutral, citing intensified competition from Amazon, Walmart, Uber, and DoorDash, threatening market share. Despite a growing $200 billion digital grocery market, pricing pressures and rival partnerships create challenges. The brokerage lowered forecasts and set a $41 price target, viewing the outlook as uncertain until risks clarify.

Morgan Stanley sees India’s equity market underestimating growth from policy reforms, rate cuts, Goods and Services Tax (GST) reductions, and front-loaded government capital spending, all expected to significantly boost domestic demand and consumption. It favours domestic cyclicals, overweighting financials, consumer discretionary, and industrials.

Upcoming data and events

Attention will remain on the U.S. government shutdown this week as key data releases, including the trade balance, jobless claims, and budget statement, remain delayed. Investors will focus on the FOMC minutes, October’s Michigan Consumer Sentiment, ECB and RBNZ policy updates, European industrial production and retail sales, and inflation data from Brazil, Mexico, Russia, and major ASEAN economies.

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