US equities advanced this week, showing resilience despite the government shutdown that began Thursday after lawmakers failed to reach a funding deal. Investors focused on weaker labor data, which strengthened expectations for a Federal Reserve rate cut in October. The ADP report showed a loss of 32,000 jobs versus forecasts for a 51,000 gain, fueling optimism for policy easing. The Nasdaq and Russell 2000 outperformed as growth and small-cap stocks benefited from lower-rate expectations. Roughly 750,000 federal employees were furloughed, halting key data releases, including the September nonfarm payrolls and possibly the CPI report due October 15. Treasury yields declined across maturities as weaker labor and consumer confidence data lifted bond prices. Municipal and investment-grade corporate bonds performed strongly, supported by solid demand.
European equities surged to record highs, with the STOXX Europe 600 up 2.9%, driven by strong tech gains and optimism over potential US rate cuts. Germany’s DAX and France’s CAC 40 each rose about 2.7%, while the UK’s FTSE 100 gained 2.2%. Eurozone inflation ticked up to 2.2% in September on higher services costs, though ECB President Christine Lagarde described inflation risks as “quite contained” and affirmed policy readiness. The jobless rate edged up to 6.3%, while consumer confidence improved slightly. In the UK, mortgage approvals slipped to 64,700 in August, but house prices rebounded 0.6% in September after a small decline the previous month.
