US shutdown continues, with NFP cancelled

European equities have started the final session of the week on a firmer footing, with all major markets opening in positive territory. These gains come in spite of the somewhat concerning decline in PMI surveys, with downward revisions across French, German, and UK services sector metrics. Unfortunately, the UK’s struggles in driving down services sector inflation remains prevalent, with the PMI decline largely a result of weak new orders, output and employment, as prices remained elevated. Attention today will also turn to a packed schedule of central bank speakers, with members of the ECB, FOMC, and BoE all making appearances.

Across the Atlantic, the focus remains firmly on Washington, where the government shutdown moves into its third day. Markets seem to have taken this political impasse in their stride, showing little sign of stress despite the noise and uncertainty that has been playing out. Markets have clearly grown accustomed to short-term upheaval and uncertainty under Trump. The lack of market reaction highlights how little investors believe the shutdown will matter for the medium-term outlook on growth or interest rates. It appears to be a story of politics rather than economics, and for now participants are treating it as such. The risk, of course, lies in sentiment souring should the stalemate drag on, though so far the response has been one of quiet indifference.

Ordinarily, today would be dominated by the release of the monthly US employment report, with the recent breakdown in job growth pushing the Fed into a more dovish stance. However, what should be a day full of volatility has turned into a somewhat serene end to the ween, with traders instead taking their lead from the recent ADP payrolls decline. Today does bring the release of the latest ISM services PMI, with inflation from that sector in particular proving to be a key hurdle that been to be overcome.

Oil is trading firmer today, though this is more a case of traders unwinding their shorts ahead of the weekend with prices having dropped into a four-month low. Despite today’s gains, WTI still remains on course for its steepest weekly drop since June. The reason for many to reduce their exposure comes down to the weekend OPEC+ meeting that many expect will bring another output increase. There is speculation that the group could raise production by a hefty 500,000 barrels per day for November, marking a significant step up from October’s modest rise. With the resumption of Kurdish exports coming at a time of higher OPEC output, it is obvious to see why many are feeling emboldened around the bearish case for oil at the moment.