Highlights
U.S. equities rebounded in the week, making it the seventh week of gains in the last ten weeks. Growth and technology stocks led the rally, with the Nasdaq outperforming the broader S&P 500. Small-cap shares also surged, as lower rates typically benefit rate-sensitive sectors. The advance came even as the government entered a partial shutdown on Thursday, following Congress’s failure to pass a funding bill to keep nonessential operations open. With the Bureau of Labor Statistics (BLS) unable to release its September employment report due to the shutdown—affecting roughly 750,000 federal workers—investors relied on private sector indicators such as the ADP data. The lack of government statistics could delay other key releases, including the September CPI due October 15, adding uncertainty ahead of the Fed’s late-October policy meeting. An ADP report showed private payrolls falling by 32,000 in September, contrary to forecasts for job gains, reinforcing hopes of easier monetary policy. However, Fed officials maintained a slightly hawkish tone, with Chicago Fed President Austan Goolsbee voicing concern over persistent services inflation, calling a delay in CPI data “problematic,” while Dallas Fed President Lorie Logan suggesting a more gradual policy normalization. European equities rallied as well, with the STOXX Europe 600 gaining 2.65% to reach record highs. Hopes for lower U.S. borrowing costs and a surge in technology shares lifted sentiment. Eurozone headline inflation accelerated slightly to 2.2% in September from 2.0% in August, driven by higher services costs and slower declines in energy prices. Core inflation stayed steady at 2.3%. ECB President Christine Lagarde said inflation risks appeared “quite contained” and noted that the current 2% policy rate leaves room to adjust if new shocks arise. Meanwhile, Eurozone unemployment ticked up to 6.3% in August, just above July’s record low of 6.2%. Consumer confidence improved modestly, with households reporting greater willingness to make major purchases over the next year. In Asia, Japan’s equity markets were mixed: the Nikkei 225 rose 0.91%, while the broader TOPIX slipped 1.82%. Technology shares outperformed on optimism over artificial intelligence investments. The 10-year Japanese government bond yield rose to 1.66%. Bank of Japan Governor Kazuo Ueda reiterated that rates could rise again if economic and price trends match forecasts. The BoJ refrained from hiking in September to maintain stability amid U.S. tariff-related volatility. Investors still expect another rate increase before year-end. Further, Chinese stocks advanced during a shortened trading week before the National Day and Mid-Autumn Festival holidays. The eight-day “Golden Week” holiday, a key period for domestic consumption, is expected to boost spending on travel, dining, and retail, benefiting consumer-focused sectors. Analysts are closely watching sales data for clues about household demand as Beijing seeks to rebalance growth toward services and consumption.
Data Highlights
Eurozone inflation edged higher to 2.2%, matching expectations and slightly above the previous 2.0%. Unemployment in the Eurozone ticked up to 6.3%, marginally above the 6.2% forecast. Japan’s unemployment rate rose to 2.6%, surpassing both the 2.4% forecast and the prior 2.3%. The Reserve Bank of Australia held its policy rate steady at 3.6%, in line with both market expectations and the previous level.
Week Ahead
Switzerland Unemployment Rate, Eurozone Retail Sales YoY – Monday | New Zealand Interest Rate Decision – Wednesday | Canada Unemployment Rate – Friday
