By Amanda Cooper and Koh Gui Qing
NEW YORK/LONDON (Reuters) -Global stocks rose on Monday while the dollar retreated as investors prepared for a possible shutdown of the U.S. government, which could delay publication of the September payrolls report and a raft of other key data due this week.
Gold roared to a record high, powered by the dip in the dollar and by investor concerns about the possible ramifications of a U.S. government shutdown.
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President Donald Trump will meet with top Democratic and Republican leaders in Congress later on Monday to discuss extending government funding. Without a deal, a shutdown would begin from Wednesday, the same day when new U.S. tariffs go into effect on heavy trucks, patented drugs and other items.
Investors, however, appeared sanguine about the risk of a U.S. government shutdown for now, which analysts attributed to memories of shallow declines in equity markets the last time the government shut down.
The S&P 500 added 0.3%, the Nasdaq Composite Index rose 0.5%, and the Dow Jones Industrial Average inched up 0.2%.
That helped the MSCI All-World index to gain 0.4%, while in Europe, the STOXX 600 rose 0.2%, heading for a gain of 1.1% in September that would mark its third straight month of increases.
“Over the last 30 years, the government has shut down only five times due to funding issues, the longest (34 days) was under Trump’s first administration. In that event, the S&P 500 initially fell by 2.1% and then recovered,” said Nicole Inui, head of equity strategy, Americas, and Alastair Pinder, head of emerging markets and global equity strategist at HSBC Global Investment Research.
A protracted closure, however, could leave the Federal Reserve flying blind on the economy when it meets on October 29.
“If the shutdown lasts beyond the Fed meeting, the Fed will rely on private data for its policy decisions,” analysts at BofA wrote in a note. “On the margin, we think this may lower the likelihood of an October cut, but only marginally.”
Markets imply a 90% chance of a Fed cut in October, with around a 65% probability of another in December.
The BofA analysts estimated a shutdown would subtract only 0.1 percentage point from economic growth for every week it lasted, while noting the impact on financial markets had been minimal in the past.
They cautioned that, should the government use the closure to lay off workers permanently, then it could have a more meaningful impact on payrolls and consumer confidence.
There is also much uncertainty about what might happen at a meeting of U.S. generals and admirals in Quantico, Virginia, on Tuesday, called by Defense Secretary Pete Hegseth, which Trump will reportedly attend.
