By Stella Qiu
SYDNEY (Reuters) -Wall Street futures slipped on Wednesday as the clock ticked down to a U.S. government shutdown that would delay the release of crucial jobs data and muddy the interest rate outlook, while Asian markets hesitated after a solid quarter of gains.
The shutdown is set to commence at 0400 GMT after the Senate rejected a short-term spending measure that would have kept government operations afloat for a few more weeks. The 55-to-45 vote effectively ensured government agencies will have to discontinue all but “essential” activities, disrupting everything from air travel to the monthly unemployment report.
Both S&P 500 futures and Nasdaq futures dropped 0.4%. Gold prices climbed 0.2% to $3,865 an ounce, back towards its record high of $3,871.45 hit on Tuesday.
With Friday’s non-farm payrolls report absent, investors may place greater weight on the ADP National Employment Report due later today. Forecasts are centred on a modest gain of 50,000 private-sector jobs.
“Typically, a shutdown is immaterial for markets. In fact, the 2018-2019 shutdown, which lasted for over a month, actually saw Wall Street rise,” said Kyle Rodda, a senior analyst at Capital.com.
Rodda added the issue for markets are twofold, with one being the delay of release of the non-farm payrolls data. The other one is “U.S. President Trump has also threatened to permanently lay-off workers, which could turn the shutdown into a mini-labour market shock,” he said.
Futures now imply a 96% chance of a rate cut from the Federal Reserve in October, up from 90% from a day earlier, with around a 74% probability of another move in December.
On Wednesday, Japan’s Nikkei dropped 1%, after an 11% surge the previous quarter. South Korean shares rose 0.7%, adding to the 11.5% gain in the last quarter, after data showed its exports rose at the fastest pace in 14 months in September.
Taiwan’s shares gained 1.3%. The island’s top tariff negotiator said on Wednesday that Taiwan will not agree to a deal with Washington for half of all semiconductor production to take place in the U.S.
Chinese markets, including Hong Kong, are closed for a public holiday.
Overnight, Wall Street managed to end the quarter on a positive note, closing higher. Data showed U.S. job openings increased marginally in August and hiring declined, and consumer confidence fell by more than expected.
In foreign exchange markets, the dollar index held steady after three straight days of losses and was last at 97.84. It inched up 0.1% to 148.1 yen, reacting little to a Bank of Japan survey showing Japanese companies expect consumer prices to rise an average 2.4% a year from now, above the central bank’s 2% target.
Later in the day, Reserve Bank of India is expected to keep rates on hold at 5.5% as it gauges the impact of past rate cuts on the economy amid trade uncertainties.
In the Treasuries market, yields were steady in Asia. The benchmark U.S. 10-year Treasury yield was flat at 4.1561%, having risen 1 basis point overnight.
Oil prices steadied on Wednesday after two consecutive days of losses as investors weighed potential OPEC+ plans for a larger output hike next month against the prospect of shrinking inventories in the U.S.
U.S. crude inched up 0.1% to $62.46 a barrel, while Brent was 0.2% higher at $66.16.
(Reporting by Stella Qiu; Editing by Sam Holmes)
