Contracts for the S&P 500 and the Nasdaq 100 rose more than 0.5% as Senate Republican leader John Thune said he plans to test support Sunday for a narrow spending package, though it’s unclear whether Democrats will back the measure. Shares opened higher in Australia while the rest of Asia was set for a cautious start as investors weigh lingering pressure on tech stocks.
While hopes for a deal may provide some relief, markets remain on edge after last week’s sharp selloff in technology shares reignited concerns about stretched valuations. Asian tech stocks are particularly vulnerable, having outperformed US peers this year on optimism around China’s AI advances. Adding to the caution is a dearth of fresh data to guide investors on the health of the US economy.
“The week ahead will depend on whether the US government can orchestrate an end” to the shutdown, Kyle Rodda, a senior analyst at Capital.com, wrote in a note to clients. While Wall Street’s rally late Friday had glossed over some of the negativity in markets, “the move was ultimately little more than putting lipstick on the proverbial pig.”
Chinese assets will be in focus on Monday after consumer prices unexpectedly rose 0.2% in October from a year earlier, as holidays during the month boosted travel, food and transport demand. Factory-gate deflation also eased.
Even if the vote on Sunday succeeds, that doesn’t necessarily mean the shutdown will end quickly. House Democrats would also have to get on board with the plan and their backing was not assured. Many Democrats in both chambers have continued to demand a one-year extension of the Obamacare subsidies for low-income Americans in exchange for agreeing to reopen the government.The S&P 500 rose 0.1% on Friday, rebounding from an earlier test of its 50-day moving average after a reading of US consumer sentiment fell to a more than three-year low. The yield on 10-year Treasuries edged higher while the dollar dropped 0.2%. The greenback is likely to trade in a range for the time being, Commonwealth Bank of Australia strategists led by Joseph Capurso wrote in a note to clients. “Even if the shutdown ends this week, it will take some time for data to be released again. Several FOMC members have signaled reluctance to cut interest rates further while important economic data is not being released.”
Elsewhere, Reserve Bank of Australia Deputy Governor Andrew Hauser is expected to reiterate the central bank’s concern over inflation pressures at a speech on Monday. The RBA’s cautious stance is likely to keep supporting the Australian dollar, according to strategists.
