As a result, the closely watched non-farm payrolls data due out on Friday from the Bureau of Labor Statistics was postponed. Nevertheless, markets were still able to get a look into the US economy via alternative data suppliers. A report from payroll processor ADP revealed that private sector employment fell by 32,000 in September. Signs of a cooling labour market reinforced the belief that the Federal Reserve will cut interest rates at its October meeting. Furthermore, ISM’s gauge on manufacturing activity remained in contraction in September, while its services purchasing managers’ index (PMI) dropped to its breakeven point.
Despite the government shutdown US equity markets took this in their stride and pressed higher. Both the S&P 500 and Dow Jones Industrial Average ended at record highs, and each added 1.1% for the week. Meanwhile the Nasdaq Composite added 1.3%, although slipped from its Thursday peak. The best performing sector of the week was healthcare. This was fuelled by news that Pfizer would be part of TrumpRx, a new direct-to-consumer website allowing Americans to buy certain drugs at discounted prices. The drugmaker also agreed to set new drug prices at 'Most Favored Nation' levels. In contrast, energy was the weakest sector, dragged down by lower oil prices. Brent crude fell around 8% as OPEC members indicated they would increase production in November. Treasury yields were lower for week amid the softer labour market data, with the 10-year Treasury yield ending at 4.12%.
European markets notched gains, supported by rising expectations for another Fed rate cut. For the week the pan-European STOXX 600 advanced 2.8% to end at a record high, in its best weekly performance since April. The European healthcare sector also received a boost from the Pfizer drug pricing deal and outperformed; on Wednesday healthcare stocks climbed over 5% in their best once-day performance since 2008. In addition, technology stocks continued to move higher fuelled by ongoing optimism around artificial intelligence. On the data front eurozone inflation accelerated in September while the manufacturing PMI fell back in to contraction in September.
Chinese markets had a holiday-shortened week, although for the two sessions ahead of the Golden Week holiday the Shanghai Composite was up 1.4%. The Hang Seng was closed on Wednesday but logged a weekly gain of 3.9%. South Korea’s Kospi rose 4.8%, with particular strength in chip-related names SK Hynix and Samsung Electronics, following of a partnership with OpenAI to develop data centres. Japanese markets were mixed with the Nikkei 225 up 0.9% whereas the broader Topix declined 1.8%. There was some uncertainty ahead of the weekend’s election, in which Sanae Takaichi was elected leader of the ruling Liberal Democratic Party.