HONG KONG – Gold hit another record yesterday, while equity markets were mixed as traders prepared for a possible US government shutdown that could affect the release of key economic data, though hopes for more Federal Reserve interest rate cuts provided support.

A string of closely watched indicators has recently supported investor expectations that the US central bank will lower borrowing costs twice more this year, having done so this month for the first time since December.

And this week has readings on the labour market lined up — on job openings, private hiring and non-farm payrolls — with forecasters predicting they will show the labour market continuing to slow, giving Fed officials room to loosen monetary policy.

However, there are concerns that the failure of Republicans and Democrats to agree to keep funding the government could mean some figures could be postponed.

Congressional leaders from both sides met President Donald Trump on Monday in a bid to find a breakthrough before a midnight Tuesday deadline, but top Senate Democrat Chuck Schumer told reporters afterwards that “large differences” remained.

Vice President JD Vance accused the Democrats of putting “a gun to the American people’s head” with their funding demands, adding that “I think we’re headed to a shutdown because the Democrats won’t do the right thing”.
While shutdowns are not usually painful, Neil Wilson at Saxo Markets remained cautious.

“Usually, markets ignore shutdowns — most last only a few days and investors seem to take a long-term view of the situation, and the short duration of most incidents has little impact on company profits. The average length of shutdowns is eight days,” he wrote.

However, he warned, “It could be different this time.

“Deep political divisions could see this drag on. A longer shutdown could have serious consequences for stocks. In the 35-day shutdown of 2018-2019 the S&P 500 fell 14%.”

He also pointed to the White House threatening mass firings, extending a recent widespread federal cull, while recent changes to economic policy added to uncertainty and raised the prospect of a potential recession.

Stock markets in Asia began the day by extending Monday’s gains but some struggled to maintain momentum.

Shanghai rose even as data showed Chinese factory activity contracted for the sixth month in a row, while Hong Kong, Taipei, Singapore, Mumbai and Wellington also climbed.

Tokyo, Sydney, Seoul, Manila, Bangkok and Jakarta fell along with London, Paris and Frankfurt.

The prospect of a shutdown and expectations for rate cuts weighed on the dollar and helped push gold to yet another peak above US$3 871.

Speculation is growing that it could soon hit US$4 000, having piled on almost 50% since the turn of the year. – Nampa/AFP